/3S7CST7 


1363.6 
I29rep 
c  .3 


ILLINOIS  SENATE 
COMMITTEE  ON  PUBLIC  UTILITIES 


I  Reply  of  Public  Utilities  Commission  to 
Criticisms  Made  Against  the  Commis¬ 
sion  and  General  Statement  Rela¬ 
tive  to  the  Administration 
of  the  Public  Utilities 
Commission  Law 


[Printed  by  authority  of  the  State  of  Illinois.] 


V 


ILLINOIS  SENATE 
COMMITTEE  ON  PUBLIC  UTILITIES 


Reply  of  Public  Utilities  Commission  to 
Criticisms  Made  Against  the  Commis¬ 
sion  and  General  Statement  Rela¬ 
tive  to  the  Administration 
of  the  Public  Utilities 
Commission  Law 


i 


ILLINOIS  STATE  LIBRARY 


Schnepp  &  Barnes,  State  Printers 
Springfield,  III. 

1919 


19455— 2M 


CONTENTS. 


INDEX— PART  I. 

Specific  Charges  Made  to  Senate  Committee  on  Public  Utilities  and  Replies 
Thereto  by  the  Public  Utilities  Commission. 

Statement  Answer 


p.  p. 

Baker,  Mr.,  City  Atty.  of  Shelbyville .  24-25  25-26 

Carey,  Mr.,  City  Atty.  of  Decatur .  23  23-24 

Carmody,  E.  J.,  Town  Atty.  of  Cicero . .  6  7 

Chicago  Assoc,  of  Commerce .  11  11-12 

Cicero,  Town  of  .  8  8-9 

Davidson,  Mr.,  Atty.  for  Greenville  Chamber  of  Commerce  12  12-13 

Decatur,  City  of .  23  23-24 

District  F,  Ill.  Northern  Utilities  Co .  15  16 

Duvall,  Senator,  (St.  Clair  Co.) .  7  7-8 

Glackin,  Senator,  (Cook  Co.) .  11  11-12 

Greenville  Chamber  of  Commerce .  12  13 

Maywood,  Village  of .  9  10 

McConchie,  Mayor,  Rock  Island .  20  20-21 

McDonald,  Duncan  .  19  19-20 

Rock  Island  .  20-21  20-21 

Scott,  Mr.,  City  Atty.  of  Rock  Island .  21  21-23 

Shelbyville,  City  of .  24-25  25-26 

Spaulding,  Mr.,  City  Commissioner,  Springfield .  17  18-19 

Springfield,  City  of .  18  18-19 

Talsted,  Mr.,  Pres,  of  the  Board  of  Trustees  of  the  village 

of  Maywood .  9-10  10 

Watson,  Robert  L.,  City  Atty.,  Aledo .  13-17  17-18 

INDEX— PART  II. 

Administration  of  the  Law . . .  26 

Emergency  Rate  Orders — Utilities  Generally .  44 

Franchise  Ordinances  .  51 

General .  27 

Home  Rule  .  28 

Illinois  Legislative  Public  Utilities  Committee .  27 

Ordinance  Rates  .  48 

Rate  Increases  .  38 

Rate  Reductions  .  35 

Receipts  (Fees  under  Sections  7  and  31),  contrasted  with 

Expenditures  from  Appropriations .  37 

Savings  by  Reduced  Rates .  37 

Special  Committee  on  Public  Utilities .  34 

State  Public  Utilities  Commission .  33 

Street  Railway  Situation .  41-44 


PUBLIC  UTILITIES  COMMISSION 

Springfield 

May  7,  1919. 

Hon.  John  Dailey ,  Chairman,  Senate  Committee  on  Public  Utilities, 

Springfield,  Illinois. 

Dear  Sir: 

On  March  20th,  the  Secretary  of  the  Public  Utilities  Commission 
received  from  you  a  letter,  of  which  the  following  is  a  copy: 

“A  series  of  public  hearings  have  been  and  are  now  being  con¬ 
ducted  by  the  Senate  Committee  on  Public  Utilities.  In  the  course 
of  these  hearings  some  criticisms  have  been  indulged  in  concerning 
the  administration  of  the  law  by  the  Illinois  Public  Utilities  Com¬ 
mission. 

“On  behalf  of  the  Senate  Committee,  I  respectfully  ask  the  Illi¬ 
nois  Public  Utilities  Commission,  if  agreeable,  to  present  in  writing 
to  the  Senate  Committee,  any  comments  such  Commission  may  desire 
to  make  relative  to  these  criticisms.  The  Committee  would  also  be 
pleased  to  receive  any  information  concerning  the  administration  of 
the  Public  Utilities  Law  generally,  and  with  particular  reference  to 
increased  emergency  rates  made  during  the  war  period. 

“I  will  be  pleased  to  furnish  the  Commission  with  a  typewritten 
copy  of  all  proceedings  of  the  Committee  in  this  matter. 

“If  it  is  agreeable  and  convenient  for  the  Commission  to  comply 
with  this  request,  I  would  further  suggest  that  a  copy  of  your  com¬ 
munication  be  submitted  to  Air.  Watson,  of  Aledo,  Illinois,  who  is 
chairman  of  the  Organized  Municipalities  of  Illinois,  demanding 
vital  amendments  to  the  present  law.” 

In  response,  the  Commission  has  caused  to  be  prepared  a  state¬ 
ment  along  the  lines  indicated  for  the  record  of  the  hearings  by  your 
Honorable  Committee,  which  statement  is  respectfully  submitted. 

Very  truly  yours, 

(Signed)  T.  E.  Dempcy,  Chairman ^ 


STATEMENT 


An  examination  of  the  record  suggests  a  statement  in  two  parts, 
one  embracing  comments  upon  or  answers  to  the  criticisms  relating 
to  the  administration  of  the  Public  Utilities  Act  by  the  Commission ; 
the  other,  containing  information  concerning  the  administration  of  said 
act  generally,  and  with  reference  to  increased  emergency  rates  during 
the  war  period. 

The  first  part  of  this  statement  embraces  comments  upon  and 
explanatory  statements  or  denials  of  charges  or  criticisms  of  the 
Commission,  involving  alleged  acts  or  omissions  respecting  notice  and 
conduct  of  hearings,  etc.,  the  inference  conveyed  being  that  the  atti¬ 
tude  of  the  Commission  has  been  one  favorable  to  the  utilities  rather 
than  in  the  interest  of  the  public  served  by  such  utilities. 

Public  officials,  possessed  of  the  proper  conception  of  the  duties, 
responsibilities  and  obligations  appertaining  to  public  office,  will  court 
fair,  just  and  constructive  criticism,  to  the  end  of  serving  the  public 
more  efficiently.  This  is  the  Commission’s  attitude  toward  the  public, 
including  the  utilities  and  the  public  served  by  them,  and  it  is  the 
constant  endeavor  of  the  Commission  to  see  to  it  that  every  officer 
and  employee  in  the  organization  shall  measure  up  to  this  conception. 

While  the  Commission  knows  that  practically  all  of  the  charges 
and  criticisms  appearing  in  the  record  are  unfair,  misleading  and  with¬ 
out  foundation  in  fact,  yet  it  does  not  wish  to  be  understood  as  here 
charging  that  said  criticisms  are  intentionally  false,  unfair  and  mis¬ 
leading,  whatever  the  fact  may  be.  It  is  apparent,  however,  that  some 
of  the  charges  and  criticisms  were  loosely  and  carelessly  made,  as  if 
upon  rumor  alone  and  without  investigation.  Some  are  by  mere  in¬ 
ference  or  innuendo,  and  are  very  difficult  to  deal  with  in  an  intelli¬ 
gible  manner. 

In  all  cases,  however,  the  Commission  has  endeavored  to  treat 
each  and  every  charge  or  criticism  frankly  and  fully,  and  its  comment 
and  answers  speak  for  themselves. 

As  to  the  second  part,  the  Commission  has  attempted  to  respond 
to  the  suggestion  of  the  Committee  for  “information  as  to  the  admin¬ 
istration  of  the  Public  Utilities  law  generally,  and  with  particular 
reference  to  increased  emergency  rates  made  during  the  war.” 

The  Commission  has  not  felt  called  upon  to  discuss  any  proposed 
Dili,  whether  to  repeal  or  amend  the  Public  Utilities  act ;  nor  to  submit 
a  brief,  either  upon  the  legality  or  wisdom  of  proposed  “Home  Rule” 
for  municipal  regulation  and  control  of  public  utilities,  as  to  service, 
rates,  security  issues,  the  granting  of  certificates  of  convenience  and 
necessity,  etc.  The  Commission  has  felt,  however,  that  it  would  be 
within  the  limits  of  propriety  to  submit  some  observations  on  the  so- 
called  “Home  Rule”  of  public  utilities,  and  to  call  attention,  by  quota- 


tion,  to  reports  of  legislative  committees  and  to  cite  some  authorities 
for  the  consideration  of  the  Committee,  bearing  directly  upon  the 
question  before  said  Committee.  Most  of  these  references,  however, 
are  in  support  and  justification  of  the  Commission’s  administration 
of  the  law  and  particularly  with  reference  to  increases  in  rates  made 
during  the  period  of  the  war,  when,  by  reason  of  abnormal  conditions 
the  rates,  service  and  general  supervision  of  public  utilities  were  so 
vitally  and  seriously  affected. 


Specific  complaints  and  charges  made  to  the  Senate  Committee  on 
Public  Utilities  against  the  Public  Utilities  Commission  at  the 
meeting  of  said  Senate  Committee  at  Springfield,  March  5, 
1919. 

E.  J.  Carmody,  town  attorney  for  the  town  of  Cicero,  stated  as 
follows : 

(pp.  17-18)  “We  have  been  placed  in  the  position  time  and 
again  right  in  our  own  little  town  of  Cicero  where  we  have  been 
legislated  against  by  this  Public  Utilities  Commission  without  re¬ 
ceiving  any  notice  whatever,  without  anything  being  done  to  notify 
us  that  they  were  going  to  do  something.  As  an  example — 

The  Chairman:  Just  pardon  me  a  moment.  You  say  that  the 
Public  Utilities  Commission  have  legislated  against  the  city  of  Cicero 
and  made  orders  with  reference  to  public  utilities  without  notice? 

Mr.  Carmody  :  Yes  sir,  absolutely,  and  I  will  cite  an  example. 
The  Chairman:  What  instance,  please. 

Mr.  Carmody  :  Through  the  town  of  Cicero  there  is  a  street 
car  line  running  which  is  known  as  the  Berwyn  Line.  It  is  a  surface 
line  carrying  passengers  from  Riverside  and  Lyons  into  Berwyn  and 
the  city  limits.  It  operated  along  a  street  known  as  Twenty-fifth 
si-'eet  east  and  west  through  the  town  of  Cicero  and  from  Porty-eighth 
avenue,  the  eastern  boundary,  to  Sixty-second  avenue,  the  western 
boundary.  Without  any  notice  whatever  to  the  municipality  other 
than  the  posting  of  a  notice  in  the  street  car  that  the  route  of  that 
line  was  going  to  be  changed,  those  cars  were  switched  on  a  certain 
day  so  that  instead  of  operating  as  they  formerly  did  on  Twenty-fifth 
street,  they  were  re-routed  up  Lifty-second  street  a  half  mile  north 
of  Lorty-second  street  and  then  east  on  Twenty-second  street  to  Lorty- 
sixth  avenue,  instead  of  going  as  they  formerly  did.  The  Commis¬ 
sion  in  its  wisdom  saw  fit  to  re-route  them,  but  they  did  not  ask  the 
officials  of  the  town  of  Cicero,  nor  did  they  ask  the  people  of  the 
town  of  Cicero  whether  they  liked  it  or  not,  nor  did  they  give  them 
an  opportunity  to  be  heard  on  the  question  of  whether  they  wanted 
these  cars  re-routed.  We  filed  a  petition  for  rehearing,  which  we  did 
as  soon  as  the  order  became  effective.  We  were  given  a  hearing  down 
there  before  Mr.  Weston,  who  is  not  a  member  of  the  Commission, 
but  an  employee,  as  I  understand  it.  Mr.  Weston  considered  our 
case  and  the  next  thing  we  heard  was  an  order  affirming  their  former 
decision  and  the  cars  today  are  operating  in  that  manner.” 


Statement  of  Public  Utilities  Commission  as  to  above  charge. 

The  file  of  the  Commission  in  case  No.  8047,  application  of  Chi¬ 
cago  and  West  Towns  Railway  Company  for  permission  to  discon¬ 
tinue  service  on  West  Twenty-fifth  street,  in  the  town  of  Cicero, 
shows  that  the  application  was  filed  on  April  25,  1918.  A  copy  of  the 
application  was  mailed  to  “Village  Clerk  of  Cicero,  Town  Hall, 
Twenty-fifth  and  Fiftieth  streets,  Cicero,  Illinois,”  on  April  26,  1918. 

On  may  23,  1918,  notice  of  hearing  to  be  held  on  June  12th,  was 
mailed  to  “Mr.  Frank  Houcek,  Clerk,  Town  of  Cicero,  2517  South 
Fiftieth  avenue,  Cicero,  Illinois.” 

Under  date  of  May  27,  1918,  Mr.  Houcek  wrote  to  the  Secretary 
of  the  Commission  as  follows :  “I  am  in  receipt  of  your  notice  of  the 
23rd  instant,  to  attend  a  hearing  at  the  office  of  the  Commission  in 
Chicago,  714  Insurance  Exchange  Building,  on  Wednesday,  June  12, 
1918,  at  10  a.  m.  Will  be  present  at  the  above  mentioned  hearing  or 
be  represented.” 

A  hearing  was  held  at  the  office  of  the  Commission  in  Chicago  on 
June  12,  at  which  the  town  of  Cicero  was  not  represented. 

An  order  was  entered  by  the  Commission  on  July  1,  1918. 

On  July  11,  1918,  the  town  of  Cicero  requested  that  the  matter 
be  reopened.  This  request  was  granted  by  the  Commission  and  a 
further  hearing  was  held  at  the  office  of  the  Commission  in  Chicago 
on  September  25,  1918,  at  which  the  town  of  Cicero  was  represented 
by  Mr.  E.  J.  Carmody  and  Mr.  Frank  Houcek. 

A  supplemental  order  was  entered  by  the  Commission  on  Novem¬ 
ber  18,  1918,  affirming  the  original  order. 


Senator  Duvall,  of  St.  Clair  County,  in  speaking  with  respect  to 
the  bill  introduced  by  him  in  the  Senate  to  abolish  the  Public  Utilities 
Commission,  among  other  things,  said : 

(p.  50)  “We  have  had  rate  increases,  demands  made  at  the  ex¬ 
pense  of  the  people  who  are  patrons  from  interurban  lines  and  others, 
in  which  it  is  provided  for  a  five  zone  system  of  collection ;  tickets 
already  printed  in  the  hands  of  the  people  to  patronize  the  road  and 
the  decision  was  not  rendered,  so  it  appears  on  the  face  of  it  those 
things  are  arranged  while  the  public  are  inquiring  what  is  going  on. 
That  is  the  reason  I  say  it  is  not  a  republican  form  of  government,  so, 
therefore,  I  am  glad  there  are  other  bills  along  the  same  line  that  will 
be  considered  with  this  bill  and  as  long  as  they  will  be  taken  together 
and  there  will  be  an  informal  discussion,  I  would  welcome  it.” 

Statement  of  Public  Utilities  Commission  as  to  above  charge. 

Evidently  Senator  Duvall,  in  the  foregoing,  refers  to  the  applica¬ 
tion  of  the  East  St.  Louis  and  Interurban  Railroad,  case  docket  No. 
8611,  for  an  increase  in  fares  under  a  proposed  zone  system  appli¬ 
cable  to  a  part  of  the  distance  between  East  St.  Louis  and  Belleville 
lying  in  the  eastern  part  of  East  St.  Louis. 

The  Commission  has  no  information  as  to  whether  the  Inter¬ 
urban  Company  at  any  time  had  printed  and  ready  for  sale  to  patrons, 


8 


tickets  adapted  for  use  under  the  zone  system  of  adjusting  fares  pro¬ 
posed  by  said  company.  If  the  company  did  so  it  was  purely  grat¬ 
uitous  on  its  part  and  without  the  knowledge  or  consent  of  the  Com¬ 
mission.  The  case  is  still  pending  and  undetermined,  and  the  charge, 
not  directly,  but  rather  by  innuendo,  that  anything  connected  with  the 
case  was  arranged  between  the  Commission  and  the  company,  where¬ 
by  the  company  was  supposed  to  have  had  knowledge  of  what  the 
order  would  be,  and  therefore  printed  tickets  adapted  to  such  an 
order,  is  wholly  without  foundation.  No  assurance  was  ever  given 
to  the  company  by  the  direction  or  authority  of  this  Commission,  or 
with  the  knowledge  of  this  Commission,  as  to  what  the  order  in  the 
case  would  be. 

The  Commission  is  at  all  times  exceedingly  careful  to  prevent 
the  giving  out  of  information  as  to  what  the  Commission  is  doing  in 
any  pending  case,  and  nobody  knows,  until  an  order  is  entered,  what 
the  decision  of  the  Commission  will  be  in  any  case. 


E.  J.  Carmody,  town  attorney  for  the  town  of  Cicero,  also  stated 
as  follows : 

(pp.  18-19)  “The  Chicago  elevated  of  the  City  of  Chicago,  and 
there  are  members  of  the  Commission  here  and  I  think  they  will  bear 
me  out  in  what  I  say — the  elevated  railroads  of  Chicago  went  in  for 
an  advance  in  rates  and  received  this  advance.  The  Douglas  Park 
branch  of  the  Chicago  Elevated  runs  through  the  town  of  Cicero 
from  its  eastern  to  its  western  limits  and  the  town  of  Cicero  was  not 
a  member  to  the  proceeding,  received  no  notice  that  an  application 
was  being  made  for  an  advance  in  rates.  Different  signs  were  posted 
in  the  cars  as  in  the  case  of  the  surface  lines,  that  is  the  first  we  knew 
of  it. 

Mr.  Hull  (Cook)  :  Were  those  raises  in  rates  in  violation  of 
ordinance  ? 

Mr.  Carmody  :  We  have  a  contract  which  requires  the  elevated 
roads  to  transport  our  passengers  to  the  loop  for  five  cents.  They  are 
charging  us  six  cents,  and  we  have  received  no  notice  of  a  hearing 
before  the  Utilities  Commission.” 

Statement  of  Public  Utilities  Commission  as  to  above  charge. 

The  records  in  case  No.  8530 — the  case  above  mentioned — show: 

That  the  application  of  the  Chicago  Elevated  Lines  for  an  in¬ 
crease  in  rates  was  filed  with  the  Commission  on  September  2,  1918. 

A  copy  of  the  application  of  the  Elevated  Lines  was  sent  to  each 
of  the  following:  Corporation  Counsel,  City  of  Chicago;  J.  L.  Vette, 
Attorney,  Chicago  Real  Estate  Board;  Wm.  M.  Lawton,  Attorney, 
Cook  County  Real  Estate  Board;  and  Chicago  Association  of  Com¬ 
merce. 

The  first  hearing  in  this  case  was  on  September  23,  1918,  at  the 
Commission’s  office  in  Chicago,  and  notices  were  sent  to  the  above 
mentioned  parties,  as  well  as  to  the  Elevated  Lines.  At  the  hearing 
on  September  23,  1918,  the  following  appearances  were  entered  of 


9 


record:  A.  L.  Gardner,  C.  H.  Adams  and  Gilbert  E.  Porter,  Attor¬ 

neys  for  petitioners ;  Samuel  A.  Ettelson,  Corporation  Counsel,  by  F. 
S.  Righeimer,  R.  G.  Crandall  and  Chester  E.  Cleveland,  for  the  City 
of  Chicago ;  Wm,  M.  Lawton,  Attorney  for  Chicago  Real  Estate 
Board;  and  Wm.  Mylan,  President  of  Division  3  of  the  A.  A.  of  S.  & 
E.  R.  E.  of  America.  Subsequent  hearings  were  held  in  this  case  on 
October  7  and  8,  1918. 

On  November  19,  1918,  the  Commission  entered  an  order  per¬ 
mitting  the  petitioners  to  increase  the  rate  of  fare  from  five  cents  to 
six  cents  on  said  Elevated  Railroads.  This  order  limited  the  time 
that  the  six-cent  fare  should  be  in  effect  to  December  1,  1919,  unless 
otherwise  ordered,  and  the  Commission  retained  jurisdiction  of  the 
case  for  the  purpose  of  modifying  said  order  at  any  time,  should 
conditions  warrant. 

It  is  true  no  notice  was  given  the  town  of  Cicero  of  the  hearing 
of  this  application.  This  was  an  oversight  on  the  part  of  the  Com¬ 
mission.  However,  from  the  fact  that  such  an  application  for  an  in¬ 
crease  in  rates  by  the  Elevated  Lines  was  pending,  and  that  hearings 
were  being  held  on  said  application,  and  was  given  wide  publicity  by 
the  Chicago  newspapers,  it  seems  inconceivable  that  any  town  or 
village  interested  did  not  learn  o’f  the  proceedings  in  this  case  before 
an  order  was  entered.  This  is  not  suggested  as  any  justification  for 
not  giving  the  town  of  Cicero  notice,  but  simply  to  suggest  that  the 
town  of  Cicero  was  not  injured  thereby,  because  in  all  probability  it 
was  a  matter  of  notoriety  in  the  town  of  Cicero,  and  that  the  town 
officials  and  the  public  generally  were  advised  of  it  even  before  hear¬ 
ings  were  held. 


"N. 


Mr.  Talsted,  President  of  the  Board  of  Trustees  of  the  village 
of  Maywood,  complained  to  the  Senate  Committee  as  follows  : 

(pp.  28-29)  “About  a  year  ago  the  Aurora,  Elgin  &  Chicago 
Railroad,  an  electric  line,  which  have  an  electric  line  running  through 
Maywood,  Illinois,  filed  a  petition  with  the  utilities  company  asking 
for  permission  to  increase  its  rates.  In  other  words,  they  filed  a  tariff 
which  increased  its  rates  with  the  commission  and  asked  permission 
that  that  tariff  might.be  put  into  effect.  During  the  hearings  and  in  the 
documents  that  were  filed  we  noticed  that  the  real  estate  of  the  com¬ 
pany  was  very  much  overvalued,  and  we  put  expert  real  estate  men  on 
the  stand  to  show  that  the  value  of  that  property,  or  the  real  estate  of 
the  company,  was  overvalued  perhaps  four  or  five  or  six  times.  Then 
.  we  took  this  attitude,  this  position,  with  the  Commission,  that  if  their 
real  estate  was  overvalued  in  that  way,  then  that  without  question 
the  balance  of  their  property  was  overvalued,  but  that  we  were  not 
experts  on  the  value  of  electrical  appliances  and  equipment  and  so 
we  said  to  the  Commission  that  we  believed  before  it  allowed  anv  ad¬ 
vance  to  this  railroad  company  it  should  make  a  full  and  complete 
investigation — physical  valuation  of  the  property.  And  we  still  be¬ 
lieve  that  should  have  been  done.  The  Commission  informed  us  that 
they  would  make  a  complete  physical  valuation  of  the  property.  Not- 


10 


withstanding  that  a  few  days  later,  or  perhaps  a  couple  of  weeks 
later,  an  order  was  issued  by  the  Commission  permitting  the  Aurora. 
Elgin  &  Chicago  Railroad  Co.  to  advance  its  rates,  and  up  to  the 
present  time,  up  to  this  date,  the  physical  valuation  of  the  railroad 
company’s  property  has  not  been  made,  or,  at  least,  has  not  been 
completed,  so  as  near  as  we  can  learn,  the  work  is  still  in  a  very  em- 
bryotic  condition  or  state.  Was  it  fair  for  this  Commission  to  allow 
the  advanced  rates  to  be  put  into  effect?  Could  they  tell  whether 
they  ought  to  be  put  into  effect  until  they  had  learned  the  value  of 
that  property  and  learned  the  amount  of  money  invested  in  that  prop¬ 
erty,  so  as  to  know  upon  what  amount  interest  must  be  paid?” 

Statement  of  Public  Utilities  Commission  as  to  above  charge. 

In  the  case  above  referred  to,  docket  No.  T532,  the  petition  of 
the  Aurora,  Elgin  &  Chicago  Railroad  Company  for  an  increase  in 
fares  applicable  to  points  on  its  line,  including  Maywood,  was  con¬ 
sidered  by  the  Commission.  Several  hearings  were  held  at  which 
the  petitioner  introduced  testimony  in  support  of  the  schedule  fded 
by  it.  Exhibits  were  filed  and  testimony  offered  indicating  the  book 
value  of  the  company’s  property.  Such  exhibits  and  testimony  were 
not  admitted  in  evidence  by  the  Commission  as  showing  the  value  of 
the  property  as  a  basis  for  rate  making,  but  merely  as  showing  for 
what  it  might  be  worth,  the  figures  at  which  the  property  was  being 
carried  on  the  books  of  the  company.  It  was  shown  that  the  com¬ 
pany  had  operated  at  a  deficit  for  the  first  four  months  of  the  year 
1918,  based  on  the  latest  cost  figures  available  at  that  time.  Their 
petition  for  increased  revenue  was  upon  the  basis  of  seeking  sufficient 
revenue  to  pay  operating  expenses  rather  than  to  provide  for  a  return 
on  investment.  It  was  shown  that  the  earnings  of  the  company  were 
actually  less  than  the  operating  expenses  for  that  period,  leaving 
nothing  for  payment  of  bond  interest  or  other  return  on  investment. 

Under  these  facts  and  circumstances  the  Commission  considered 
that  a  physical  valuation  of  the  property  of  the  company  was  unneces¬ 
sary  ;  that  it  would  be  expensive  to  make  such  valuation  and  would 
take  many  months  to  complete  the  case.  In  other  words,  the  applica¬ 
tion  was  based  on  an  alleged  emergency,  the  basis  of  which  was  that 
the  company  was  not  earning  operating  expenses. 

The  Commission  entered  an  order  permitting  the  company  to 
increase  its  rates  to  two  cents  per  mile,  that  being  the  maximum 
lawful  rate  under  the  Illinois  Maximum  Passenger  Fare  law. 

On  February  6,  1919,  the  District  Court  of  the  United  States, 
Northern  District  of  Illinois  (Judge  Landis  presiding),  upon  the  bill 
filed  by  the  company,  held  the  fare  of  two  cents  per  mile,  provided 
by  said  Illinois  Maximum  Passenger  Fare  law,  was  confiscatory  as  to 
that  road  at  that  time,  and  entered  a  decree  authorizing  said  company 
to  increase  its  rates  in  an  amount  not  to  exceed  three  cents  per  mile, 
that  being  the  rate  charged  by  railroads  under  the  control  of  the 
United  States  Railroad  Administration. 


11 


Senator  Glackin,  of  Cook  County,  in  cross-examining  Mr.  Kelly, 
attorney  for  the  Chicago  Association  of  Commerce,  appeared  to  be 
under  the  impression  that  a  complainant  living  in  Chicago  would 
have  to  come  to  Springfield  to  be  heard  before  the  Commission.  His 
question  to  Mr.  Kelly,  and  the  latter’s  replies  on  this  matter,  were  as 
follows : 

(p.  68)  “Mr.  Glackin  (Cook):  In  reference  to  your  remark 
that  the  common  man  can  be  heard.  A  man  in  Chicago  would  have  to 
take  a  train  and  come  to  Springfield,  wouldn’t  he? 

Mr.  Kelly:  No;  they  sit  in  Chicago.  I  have  appeared  before 

them  there. 

Mr.  Glackin  (Cook)  :  How  often  do  they  have  hearings  up 

there  ? 

Mr.  Kelly:  I  found  them  there  a  great  many  times  when  I  go 
into  the  building. 

Mr.  Glackin  (Cook)  :  Do  they  have  a  permanent  place? 

Mr.  Kelly:  They  have  permanent  offices  there. 

Mr.  Glackin  :  In  session  all  the  time? 

Mr.  Kelly:  In  session  constantly. 

Mr.  Glackin  :  About  two  or  three  times  a  month  ? 

Mr.  Kelly:  No,  they  sit  there  constantly.  And  my  under¬ 
standing  is  the  Commission  will  take  the  testimony  where  the  testi¬ 
mony  is  desired  to  be  given. 

Mr.  Denvir  (Cook)  :  You  say  they  can  go  before  the  Commis¬ 
sion  and  be  heard? 

Mr.  Kelly:  Yes,  sir.” 

Statement  of  Public  Utilities  Commission  as  to  above  charge. 

The  Commission,  practically  ever  since  its  organization,  has  had 
a  permanent  office  in  Chicago  at  175  West  Jackson  Boulevard.  The 
address  of  the  Commission  in  Chicago  is  Room  714  Insurance  Ex¬ 
change  Building,  175  West  Jackson  Boulevard. 

In  connection  with  said  Room  714,  and  in  the  same  suite,  are 
eight  other  rooms.  One  is  occupied  by  the  assistant  chief  engineer  of 
the  Commission,  whose  headquarters  is  in  the  Chicago  office ;  another 
room  for  investigators ;  one  for  the  chairman,  which  is  also  used  as 
a  conference  room ;  one  for  the  Secretary,  and  other  uses ;  one  large 
hearingroom  adjacent  to  said  Room  714;  and  three  other  rooms, 
which  are  used  by  the  Commissioners,  respectively,  for  hearings  and 
other  purposes. 

The  Commission  meets  in  the  Chicago  office  the  second  and  fourth 
weeks  in  each  month,  and  calls  the  docket  of  all  cases  of  every  de¬ 
scription  involving  matters  arising  in  Chicago  and  all  points  in  North¬ 
ern  Illinois,  to  which  Chicago  is  more  accessible  by  rail  than  is  Spring- 
field.  At  these  calls  of  the  docket  a  sufficient  number  of  examiners, 
together  with  the  commissioners,  are  present  so  that  cases  in  which 
the  parties  are  ready  to  proceed  with  hearings  are  heard  at  once.  In 
this  way  the  Commission  serves  Chicago  and  Northern  Illinois  as 
promptly  and  effectively  as  possible,  and  there  has  been  no  complaint 


1? 


heretofore  of  inadequate  facilities  or  unnecessary  delays  in  disposing 
of  matters  arising  in  Chicago  and  Northern  Illinois. 

The  Chicago  office  is  open  every  day  except  Sundays  and  holidays 
throughout  the  year.  The  people  of  the  State  may  obtain  information 
at  this  office  within  the  office  hours  at  any  time.  Blanks  are  furnished 
to  anyone  requesting  the  same,  upon  which  complaints  and  applica¬ 
tions  may  be  made  with  respect  to  rates,  service,  facilities,  etc.,  of 
any  utility,  by  calling  upon  or  writing  to  the  Commission  at  said  office. 

There  are  received  at  this  office  complaints  and  petitions,  both 
formal  and  informal,  involving  utility  business  in  Chicago  and  North¬ 
ern  Illinois,  and  every  facility  is  afforded  for  the  handling  of  the 
business  of  the  Commission  arising  in  Chicago  and  Northern  Illinois. 


Mr.  Davidson,  attorney  for  the  Greenville  Chamber  of  Com¬ 
merce.  stated  in  part  as  follows : 

(p.  78)  “Just  another  thing  or  two.  There  is  no  precedent  by 
which  this  Commission  can  act.  They  have  no  precedent.  I  know 
of  an  instance  in  my  town  where  the  secretary  was  called  up  here  by 
the  Commission.  There  was  a  rehearing  set  and  the  city  of  Green¬ 
ville  were  making  arrangements  to  meet  it  and  to  present  their  case 
and  we  got  notice  the  thing  had  been  indefinitely  postponed,  although 
there  was  an  order  then  existing  to  charge  us  extra  rates.  And  when 
the  mayor  called  up  the  secretary  of  the  Commission  and  said:  ‘Is 
this  not  a  little  unusual  ?  Courts  don’t  do  this.’  He  said :  ‘This  is  not 
a  court  of  law.’  He  was  correct.  They  know  no  bounds ;  they  know 
no  precedent.  I  have  nothing  personally  against  the  men.  I  know 
no  gentleman  on  the  Commission.  I  want  to  say  that.  They  are 
undoubtedly  all  reliable  men.” 

Statement  of  Public  Utilities  Commission  as  to  above  charge. 

The  conversation  referred  to  by  Mr.  Davidson  relates  to  case 
No.  8054,  which  involved  the  rates  for  municipal  pumping  service  at 
Greenville  and  O’Fallon.  This  service  is  furnished  by  the  Southern 
Illinois  Light  and  Power  Company.  The  rates  were  adjusted  by  an 
order  of  the  Commission  entered  on  July  31,  1918.  The  utility  com¬ 
pany  was  not  satisfied,  however,  and  on  October  24,  1918,  filed  a 
supplemental  schedule,  setting  forth  increased  rates  for  said  municipal 
pumping  service.  The  Commission,  on  November  19,  1918,  entered 
an  order  suspending  the  increased  rates. 

The  case  was  set  for  hearing  for  February  10,  1918,  and  notices 
were  sent  to  the  company  and  to  the  mayors  of  Greenville  and 
O’Fallon. 

On  February  4th  the  Southern  Illinois  Light  and  Power  Com¬ 
pany  wrote  the  Commission,  requesting  that  the  hearing  be  postponed, 
as  follows : 

In  view  of  the  fact  that  we  are  taking  this  matter  up  with  these  inter¬ 
ested  cities,  and  endeavoring  to  effect  an  adjustment  with  them  rather 
than  let  the  matter  go  to  formal  hearing,  our  purpose  being  to  keep  these 
cities  satisfied  and  avoid  any  ill  feeling  toward  our  Company. 


13 


x 


v 


\ 


A  continuance  was  granted,  and  on  February  1th  all  parties 
interested  were  notified  of  that  fact. 

On  February  10th  the  mayor  of  Greenville  telephoned  the  office 
of  the  secretary  of  the  Commission  and  inquired  why  this  case  had 
been  continued  without  his  consent  having  first  been  obtained.  He 
was  told  it  was  usual  for  the  Commission  to  allow  a  continuance  of 
the  first  setting  of  any  case  upon  the  application  of  any  party  inter¬ 
ested,  if  made  in  apt  time  and  for  good  cause.  The  mayor  answered 
that  it  was  customary  in  justice  courts  to  consult  with  all  parties 
before  a  continuance  was  granted.  The  secretary’s  office  replied  that 
the  Commission  did  not  follow  the  practice  prevailing  in  justice  courts 
but  endeavored  to  be  reasonably  liberal  in  the  matter  of  continuances. 

The  mayor  was  further  advised  that  if  he  desired  an  early  hear¬ 
ing  held  in  this  case  his  request  would  be  given  consideration.  Up 
to  this  time,  however,  he  has  made  no  such  request  and  in  the  mean¬ 
time  the  proposed  increased  rates  for  pumping  service  are  un(U^|- 
suspension,  as  the  company  has  not  asked  that  the  case  be  reset,  f 

Cases  that  are  not  ex-parte  are  never  continued  upon  the  applica¬ 
tion  of  one  party  without  the  knowledge  and  consent  of  the  other, 
except  in  cases  such  as  this,  where  the  petitioning  party  advises  the 
Commission  that  it  does  not  wish  to  press  its  petition  for  advanced 
rates  because  of  a  prospect  of  satisfactory  adjustments  between  the 
parties.  That  is  the  thing  which  caused  the  Commission  in  this  case 
to  advise  all  parties  that  the  case  was  continued.  Where  there  is  a 
prospect  of  the  parties  getting  together  in  a  controverted  matter  the 
policy  of  the  Commission,  as  a  general  rule,  has  been  to  give  them  an 
opportunity  to  do  so,  and  that  was  the  purpose  of  continuing  this  case 
upon  ex-parte  suggestion. 


Specific  complaints  and  charges  made  to  the  Senate  Committee  on 
Public  Utilities  against  the  Public  Utilities  Commission  at  the 
meeting  of  said  Senate  Committee  at  Springfield,  March  18, 
1919. 

Robert  L.  Watson,  attorney  for  the  Municipal  Home  Rule 
League,  stated  in  part  as  follows : 

(pp.  14-15)  “Now,  strange  to  say,  there  are  a  number  of  mayors 
and  city  attorneys  and  aldermen  within  the  sound  of  my  voice,  who 
seem  to  think  that  a  contract  which  a  city  makes,  whereby  it  gets 
good  value  for  the  use  of  its  streets  or  something  else,  should  be 
binding  on  the  other  party  as  well  as  on  itself,  and  it  is  hard  for  us 
to  get  away  from  that  idea.  They  think  that  if  a  utility  makes  a 
contract  for  ten  years  to  furnish,  we  will  say,  street  cars,  street  car 
service,  electric  service  or  anything  else,  at  a  certain  rate,  and  prices 
go  down,  that  the  utility  should  have  the  benefit  of  that ;  that  is,  that 
they  should  be  able  to  pay  a  higher  rate  of  dividends  on  what  they 
have  got  actually  invested,  and  we  are  foolish  enough  to  think  that. 
And  on  the  other  hand  we  believe  it  is  good  business,  when  prices 
go  up  and  the  margin  is  low,  then  the  investor  should  take  a  lower 
rate  on  his  money  invested.  We  believe  that  is  good  business ;  we 
believe  that  is  right.” 


14 


Statement  of  Public  Utilities  Commission  as  to  above  charge. 

With  reference  to  Mr.  Watson’s  statement  that  rates  agreed  upon 
by  a  municipality  and  a  public  utility  for  a  term  of  ten  or  twenty 
years  should  be  binding  and  that  rates  so  fixed  should  not  be  changed 
during  that  period,  the  law  on  this  proposition  was  first  established 
in  this  State  in  a  case  in  which  a  city  made  a  bad  bargain  with  respect 
to  rates  to  be  charged  by  a  water  company  for  a  period  of  thirty 
years. 

Reference  is  made  to  the  case  of  City  of  Danville  v.  Water  Com¬ 
pany,  decided  February  17,  1899,  and  reported  in  178  Ill.,  299. 

In  that  case  the  rates  agreed  upon  by  the  city  and  the  water  com¬ 
pany  which  were  embodied  in  a  franchise  ordinance  were  paid  with¬ 
out  protest  for  about  twelve  years.  At  the  end  of  that  time  the  city 
of  Danville  attempted  to  reduce  the  rates  to  meet  the  changed  con- 
<jDA>ns  then  existing.  In  the  litigation  that  followed  the  water  com- 
pS^y  contended  that  the  franchise  ordinance  which  had  been  accepted 
and  acted  upon  by  said  company  constituted  a  valid  and  binding  con¬ 
tract,  protected  by  the  Constitution  of  the  United  States,  and  that  the 
rates  fixed  in  said  ordinance  could  not  lawfully  be  disturbed.  In 
overruling  this  contention  of  the  water  company  the  Illinois  Supreme 
Court  used  the  following  language : 

(p.  312)  “If  the  rates  were  to  be  fixed  by  ordinance,  they  could  only 
be  fixed  by  such  ordinance  as  was  legal  and  whose  passage  was  within  the 
power  of  the  council.  A  legislative  body  cannot  part  with  its  powers  by 
any  proceeding,  so  as  not  to  be  able  to  continue  the  exercise  of  such  powers. 
It  has  no  authority  even  by  contract  to  control  and  embarrass  its  legisla¬ 
tive  powers  and  duties  (Greenhood  on  Public  Policy,  p.  317;  Cooley’s  Const 
Lim.,  p.  206;  15  Am.  &  Eng.  Ency.  of  Law,  p.  1045;  1  Dillon  on  Mun.  Corp., 
sec.  443).  What  might  be  proper  for  a  city  this  year  might  not  be  proper 
the  next  year.  It  is  impossible  to  determine  with  absolute  or  even  toler¬ 
able  certainty  what  changes  a  few  years  might  work  in  the  character  and 
reasonableness  of  rates  to  be  charged  for  water  supply.  No  contract  is 
reasonable  by  which  the  governing  authority  abdicates  any  of  its  legislative 
powers,  and  precludes  itself  from  meeting,  in  a  proper  way,  emergencies, 
or  occasions  that  may  arise.  ‘These  powers  are  conferred  in  order  to  be 
exercised  again  and  again,  as  may  be  found  needful  or  politic,  and  those 
who  hold  them  in  trust  today  are  vested  with  no  discretion  to  circumscribe 
their  limits  or  diminish  their  efficiency,  but  must  transmit  them  unim¬ 
paired  to  their  successors.  This  is  one  of  the  fundamental  maxims  of 
governments;  and  it  is  impossible  that  free  government  with  restrictions 
for  the  protection  of  individual  or  municipal  rights  could  long  exist  without 
its  recognition.’  (Gale  v.  Kalamazoo,  23  Mich.,  354;  Millikin  v.  County  of 
Edgar,  142  Ill.,  528).” 

This  decision  was  affirmed  by  the  Supreme  Court  of  the  United 
States  and  is  reported  in  180  U.  S.,  619. 

The  cities  of  Rogers  Park  and  of  Freeport  also  had  similar  ex¬ 
periences  with  their  respective  water  companies  at  about  the  same 
time,  and  in  the  litigation  that  ensued  the  Illinois  Supreme  Court 
adhered  to  its  decision  in  the  Danville  case  (See  Rogers  Park  Water 
Co.  v.  John  B.  Fergus,  178  Ill.,  571;  Freeport  Water  Co.  v.  City  of 
Freeport,  186  Ill.,  179). 

The  principles  enunciated  in  the  above  cases  have  become  the 
settled  law  of  this  State. 


15 


Mr.  Watson  further  said  (p.  20)  : 

“But  I  was  going  to  say  about  that  District  F,  in  that  hearing  a 
very  estimable  gentleman  whom  I  will  not  name  testified  on  behalf 
of  his  corporation,  that  they  had  an  investment  of  $780,000  in  that 
district — no,  $278,000;  I  beg  your  pardon;  they  had  an  investment  of 
a  trifle  over  a  quarter  of  a  million  dollars  in  that  district,  but  I  think 
he  spilled  his  conscience  somewhat  then,  because  then  he  was  en¬ 
deavoring  to  get  a  higher  rate.  Shortly  thereafter  we  obtained  per¬ 
mission  to  examine  their  files,  and  we  found  that  prior  to  that  time, 
towit,  on  the  31st  day  of  May,  1915,  they  had  in  their  statement  of 
assets  and  liabilities  for  District  F,  $100,000  preferred  stock  on  the 
liability  side;  $200,000  common  stock;  $200,000  odd,  first  bonds  first 
mortgages ;  two  hundred  thousand  and  some  odd  dollars  gold  deben¬ 
tures  ;  $228,000  Mid-West  securities ;  two  hundred  thousand  odd 
to  somebody  else,  and  in  all  making  a  million  and  seven  thousand 
dollars  that  they  had  charged  up  to  that  district  which  they  were 
asking  us  to  pay  a  dividend  on,  when  out  of  their  own  mouth  they 
said  that  they  had  but  $278,000  invested.  Now,  if  you  do  not  think 
that  is  so,  you  go  down  to  the  city  of  Aledo  and  you  go  over  on  Fifth 
street  opposite  the  Merchants  Hotel,  and  you  go  in  there  and  ask  them 
to  look  at  their  books,  and  if  they  will  let  you  do  it,  that  is  what  they 
will  show ;  and  on  the  other  hand,  if  you  want  the  testimony  as  to 
what  they  testified  as  to  the  value,  you  will  find  that  in  the  office  of 
the  Commission  here  in  Springfield.  That  is  only  one  instance. ” 

Mr.  Watson  also  stated  (pp.  24-25)  : 

“Now,  it  is  very  difficult  to  get  at  the  actual  investment,  but  one 
way  to  get  it  is  the  property  inventory,  and  in  a  case  that  was  heard 
here  recently  wherein  the  question  of  raising  the  rates  was  concerned, 
the  report  of  the  engineer  of  the  Commission  was  that  he  had  made 
a  property  inventory.  Yes,  he  had  made  a  property  inventory,  and 
how  had  he  done  it?  Well,  he  said — now  I  think  it  was  at  Jerseyville 
there,  they  have  a  plant  there  we  will  say  half  as  big,  that  is,  they  have 
half  as  many  acres,  half  as  many  consumers — well,  he  said,  T  have 
gone  over  the  district  carefully,  I  know  how  their  property  is  esti¬ 
mated  and  I  am  advised  about  that.’  Very  well,  if  Jerseyville  had 
1000  consumers  and  District  F  had  2000,  therefore  Jerseyville  would 
have  half  as  many  poles,  and  therefore  they  would  have  half  as  many 
cross-arms,  and  therefore  they  would  have  half  as  many  miles  of 
wire,  and  therefore  they  would  have  half  as  many  glass  knobs,  and 
therefore  they  would  have  half  as  many  meters  and  buttons  and  pins 
and  lead  pencils  and  other  things.  Now,  actually,  that  is  a  fact,  right 
here  on  record  in  this  building,  of  how  the  estimate  was  made  on  that 
district.  He  went  down  there,  drove  through  there,  looked  it  over 
temporarily,  and  it  also  covered  a  heating  plant,  and  when  that  gentle¬ 
man  was  confronted  with  pictures  of  that  heating  plant  and  asked  if 
that  was  the  plant,  he  didn’t  know  but  what  we  were  flashing  some 
other  plant  on  him,  and  he  was  afraid  to  say  whether  it  was  it  or  not. 
He  did  not  look  over  that  plant  enough  to  know  whether  he  could 
recognize  a  picture  of  it.  Now,  all  of  these  things  are  of  record  right 
up  here  in  different  cases,  and  any  man  who  wishes  to  look  for  them, 


16 


I  will  give  you  the  cases,  or  I  will  give  you  the  dates  if  you  want 
them.” 

Statement  of  Public  Utilities  Commission  as  to  above  charge. 

In  the  above  statement  Mr.  Watson  says  in  substance  that  the 
balance  sheet  of  the  Illinois  Northern  Utilities  Company  shows  stocks 
and  bonds  outstanding  to  the  amount  of  $1,007,000 ;  that  in  a  rate 
hearing  before  the  Commission  a  witness  for  the  utility  testified  that 
said  company  had  an  investment  of  $278,000,  but  nevertheless  the 
company  was  seeking  rates  that  would  enable  it  to  pay  dividends  on 
the  $1,007,000  of  outstanding  stocks  and  bonds. 

While  Mr.  Watson  does  not  say  so  directly,  it  might  be  inferred 
from  his  statement  that  the  Commission  allowed  rates  sufficient  to 
allow  a  return  on  this  $1,000,000  of  securities. 

Evidently  Mr.  Watson  refers  to  case  No.  7832,  which  was  an 
application  by  the  Illinois  Northern  Utilities  Company  for  an  increase 
in  electric  rates  in  portions  of  the  counties  of  Mercer,  Henry,  Warren 
and  Knox. 

In  this  case  an  exhibit  marked  “Alexander’s  Exhibit  F”  was  of¬ 
fered  by  the  company  and  admitted  in  evidence.  This  exhibit  shows 
that  according  to  the  books  and  records  of  the  company  there  had 
been  expenditures  made  for  additions  and  betterments  to  the  electric 
property  in  district  F  since  the  acquisition  of  said  property  by  the 
interests  now  controlling  it,  in  1912,  of  $278,628.49.  In  other  words, 
this  exhibit  showed  the  amount  that  the  Illinois  Northern  Utilities 
Company  claimed  had  been  expended  by  it,  and  its  predecessor,  the 
Tri-County  Light  and  Power  Company,  in  additions  and  improve¬ 
ments  to  the  electric  property  in  this  district,  exclusive  of  the  value 
of'  the  existing  plant  that  was  acquired  in  1912,  and  exclusive  of  the 
value  of  the  steam  heating  plant  owned  by  the  company  at  Aledo. 

In  fixing  rates  the  Commission  has  never  been  governed  by  the 
amount  of  securities  outstanding  in  this  or  in  any  other  case.  The 
Commission’s  experts  are  capable  of  estimating  the  actual  cost  of 
such  property.  In  the  case  above  referred  to  a  temporary  rate  in¬ 
crease  was  granted,  effective  June  1,  1918.  This  order  provided  that 
if  the  Commission,  aftei  completing  its  valuation  and  investigation 
of  the  company’s  property,  should  fix  lower  rates  for  electric  service 
than  the  temporary  rates  therein  authorized,  the  company  should, 
within  thirty  day  from  the  time  said  lower  rates  became  effective, 
refund  to  each  consumer  all  amounts,  including  interest  at  six  per 
cent  per  annum,  collected  by  it  in  excess  of  the  sum  that  would  have 
been  collected  had  the  rates  finally  determined  been  in  effect  during 
the  period  that  the  temporary  rates  were  collected. 

Since  that  order  was  entered  the  Commission’s  engineering  staff 
has  valued  this  entire  property  at  $320,000  and  a  final  order  in  this 
case  is  now  being  drafted. 


Again  Mr.  Watson  stated  (pp.  26-27)  : 

“We  have  contributed  to  the  Red  Cross,  the  K.  of  C.,  the  Y.  M. 
C.  A.  and  all  that,  we  have  dug  down  in  our  pockets  and  we  are  proud 


17 


of  ourselves  in  the  State  of  Illinois  in  the  way  we  have  carried  on 
this  war  proposition,  and  while  we  have  been  doing  that,  here  is  this 
corporation  in  Rockford — and  others,  that  have  not  so  much  as  lifted 
their  little  finger;  if  they  gave  anything  to  the  Red  Cross  they  charged 
it  in  their  expense  accounts;  if  they  bought  any  bonds  they  put  them 
on  the  market  and  sold  them;  if  they  gave  anything  to  the  Red  Cross 
they  take  the  credit  for  it  and  charge  it  in  the  expense  account,  and 
and  you  will  find  it  in  the  expense  account  on  file  here  in  this  Capi¬ 
tol.  Instead  of  that,  they  were  asking  us  to  lift  more;  they  were  not 
willing  to  £}o  ahead  with  a  little  more  than  the  profit  they  had  last 
year,  but  they  were  asking  for  an  increase,  and  have  received  an  in¬ 
crease  which  they  say  will  net  them  a  million  more  than  they  got  last 
year.” 

And  on  this  same  subject,  W.  J.  Spaulding,  City  Commissioner 
of  Springfield,  said  (p.  39)  : 

“Another  matter  that  has  been  referred  to,  but  I  don’t  think  it 
was  emphasized  as  strongly  as  it  should  be,  and  that  is  that  the  com¬ 
panies  are  allowed  in  the  expense  account  for  advertising,  and  here  is 
the  way  it  works  out.  The  companies  will  raise  the  rates  and  then 
they  will  take  out  of  us,  out  of  the  rates  enough  money  to  pay  for 
advertising  with  deceptive  and  delusive  ads  making  us  try  to  like  it, 
and  furthermore,  they  are  provided  with  money  for  charity,  and  when 
the  Y.  M.  C.  A.  and  the  Y.  W.  C.  A.  and  various  charities  are  to  be 
supported  the  utility  companies  get  credit  for  it,  and  we  are  the  ones 
to  pay  the  bill,  and  we  don’t  have  any  say  about  how  the  money  shall 
be  distributed.” 


Statement  of  Public  Utilities  Commission  as  to  above  charge. 

In  the  uniform  system  of  accounts,  prescribed  by  the  Commission 
for  use  by  all  public  utilities  in  this  State,  the  Commission  directed 
that  payments  made  for  advertising,  for  charitable  purposes,  etc., 
should  be  shown  in  certain  accounts.  In  its  order,  making  effective 
said  accounting  rules,  the  Commission,  among  other  things,  said 

(p-  6j /■ 

“In  prescribing  this  system  of  accounts  the  Commission  does  not 
bind  itself  to  approve  any  .item  set  out  in  any  account,  either  as  to 

amount  or  character,  for  rate  fixing  purposes  or  when  authorizing 

the  issuance  of  securities.  The  prescribed  system  of  accounts  is 
designed  to  set  out  the  facts  in  connection  with  the  income,  expendi¬ 
tures,  etc.,  and  therefrom  the  Commission  will  determine,  when  en¬ 
gaged  in  fixing  rates  or  approving  issues  of  securities,  just  what  con¬ 
sideration  shall  be  given  to  the  various  items  in  the  several  accounts.” 

With  respect  to  war  charities,  donations,  such  as  contributions  to 
the  Red  Cross,  the  Y.  M.  C.  A.,  K.  of  C.,  and  other  similar  agencies, 
the  practice  of  the  Commission  has  been  to  eliminate  all  such  items 
from  the  operating  expenses  of  any  utility  whose  rates  are  being 
adjusted.  This  is  done  on  the  theory  that  such  donations  should  be 
bourne  by  those  who  participate  in  the  profits  of  the  business,  and 

should  not  be  included  in  operating  expenses  that  are  to  be  used  in 

fixing  rates. 


18 


If  donations  made  by  the  corporation  (the  utility)  were  allowed 
by  the  Commission  by  charging  same  to  operating  expenses,  the  result 
would  be  that  the  consumer  would  pay  such  donations  in  the  payment 
of  rates  for  service.  Such  donations  are  never  so  handled  by  the  Com¬ 
mission  as  to  result  in  the  payment  of  same  by  consumers  or  patrons. 
On  the  contrary,  they  are  always  eliminated  from  the  operating  ac¬ 
count  as  items  which  should  not  be  paid  by  the  consumer,  but  which 
must  be  paid  out  of  net  return,  which  means  that  they  are  paid  by 
the  stockholders  of  the  corporation. 

Mr.  Watson  and  Mr.  Spaulding,  in  giving  your  honorable  Com¬ 
mittee  the  impression  that  the  records  of  the  Commission  show  such 
donations  charged  to  operating  expenses  in  rate  cases,  are  laboring 
under  a  misapprehension.  There  are  no  records  which  show  any 
such  thing,  as  the  Commission  has  not  at  any  time  indulged  in  any 
such  practice.  With  all  due  respect,  the  Commission  cannot  refrain 
from  making  the  suggestion  that  such  statements  are  reckless  and 
wholly  unwarranted. 


Air.  Spaulding  also  stated  (p.  44)  : 

“And  here  is  a  comparison  that  is  worth  reflecting  on  a  little. 
Here  is  the  Home  of  the  Friendless,  a  charitable  institution  that  has 
to  depend  on  donations  for  its  support.  Their  electric  light  bill  was 
$26.15.  Using  the  same  amount  of  current,  on  the  same  basis  of 
figuring,  the  Federal  Building  here  in  Springfield  would  have  been 
charged  $13.18.  A  little  less  than  half  of  what  the  Home  of  the 
Friendless  was  charged.” 

Statement  of  Public  Utilities  Commission  as  to  above  charge. 

The  Springfield  Gas  &  Electric  Company  filed  a  schedule  with 
this  Commission  setting  forth  a  rate  to  be  charged  the  United  States 
Government  for  electric  lighting  and  power  service  in  all  buildings 
owned  or  occupied  by  it.  This  schedule  was  neither  approved  nor 
disapproved  by  the  Commission  and  became  effective  at  the  end  of 
thirty  days  from  the  date  it  was  filed. 

The  reasonableness  of  the  rate  stated  in  said  schedule  has  never 
been  challenged,  and  no  complaint  that  said  rate  has  proved  dis¬ 
criminatory  has  been  made  to  this  Commission.  If  such  complaint 
were  made  as  to  this  or  any  other  rate,  the  Commission  would,  of 
course,  hold  a  hearing  and  determine  the  question. 

It  might  be  argued  that  any  rate  to  the  Federal  Government 
could  not  be  discriminatory,  as  the  government  is  in  a  class  by  itself, 
and  a  low  rate  to  it  would  inure  to  the  benefit  of  the  public  rather 
than  to  its  injury. 

However,  at  the  present  time  the  Federal  Building  in  Springfield 
is  being  furnished  electric  current  from  the  municipally  owned  electric 
plant,  of  which  Air.  Spaulding  has  general  supervision. 

\Ye  find,  upon  investigation,  that  the  Home  for  the  Friendless 
has  been  charged  for  electric  current  on  what  is  known  as  the  “Con¬ 
sumers’  Lighting  Rate  Schedule”,  and  that  its  electric  bill  for  the 
last  year  was  $254.79.  Considering  the  amount  of  current  it  uses, 


19 


this  institution  has  the  right  to  take  current  on  the  basis  of  what  is 
known  as  the  “Contract  Consumers’  Lighting  Schedule",  and  on  that 
basis  its  rate  for  the  same  amount  of  current  would  be  $225.78.  The 
benefit  of  this  latter  rate  schedule  has  now  been  offered  to  the  Home 
for  the  Friendless. 


Duncan  McDonald  stated  in  part  as  follows  (pp.  47-48): 

“I  have  no  desire  to  criticize  the  members  of  the  State  Utilities 
Commission,  but  I  am  going  to  point  out  one  or  two  concrete  illustra¬ 
tions.  Some  time  ago  we  complained  about  our  gas  rate  here,  and 
we  complained  about  our  electric  rate,  our  electric  light  rate.  We 
attempted  to  show  that  the  rate  was  entirely  out  of  proportion  to  the 
earnings  of  the  company  and  we  are  the  victims  of  the  same  concern 
that  operates  these  public  utilities  in  many  different  cities,  the  Hoden- 
pyle-Hardy  syndicate  of  New  York. 

“When  this  complaint  was  made  we  had  the  matter  go  up  in  the 
regular  way  to  the  State  Utilities  Commission  and  were  granted  a 
reduced  rate.  The  company  then  by  right  they  had  under  the  law, 
appealed  the  case,  I  believe,  to  the  Circuit  Court,  and  we  are  still 
waiting  to  hear  from  there  to  get  this  money  back.  Now,  I  am  not 
very  old.  I  had  to  register  in  the  recent  draft,  but  I  would  like  to 
get  that  money  back  before  I  shuffle  off,  and  I  don’t  see  my  im¬ 
mediate  prospect  if  the  present  arrangement  is  going  to  be  continued.” 

Statement  of  Public  Utilities  Commission  as  to  above  charge. 

The  case  referred  to  by  Mr.  McDonald  is  entitled  City  of  Spring- 
field  v.  Springfield  Gas  &  Electric  Company,  docket  No.  2138.  This 
was  a  complaint  by  the  City  of  Springfield  that  the  gas  rates  of  the 
utility  company  were  excessive.  The  Commission  held  several  hear¬ 
ings  on  this  complaint  and  valuations  of  the  property  were  submitted 
by  the  city,  the  company  and  engineers  for  the  Commission. 

On  March  9,  1916,  the  Commission  entered  an  order  reducing 
the  rates  for  gas  from  one  dollar  to  eighty  cents  per  thousand  cubic 

feet. 

On  March  28,  1916,  the  Gas  Company  served  notice  of  appeal 
upon  the  Commission. 

On  April  4,  1916,  the  Commission  filed  a  certified  copy  of  the 
record  in  this  case  with  the  clerk  of  the  circuit  court  of  Sangamon 

County. 

On  April  6,  1916,  on  motion  of  the  utility  company,  said  circuit 
court  entered  an  order  staying  the  operation  of  the  order  of  the 
Commission  and  requiring  the  Gas  Company  to  deposit  with  a  local 
bank,  as  a  trust  fund,  all  moneys  collected  in  excess  of  the  rates  fixed 
by  the  Commission’s  order,  said  moneys  to  be  turned  back  to  the  gas 
consumers  in  event  the  order  of  the  Commission  is  sustained  by  the 
courts. 

On  January  3,  1918,  the  final  arguments  were  made  in  the  circuit 
court,  and  the  case  taken  under  advisement,  but  up  to  this  time  there 
has  been  no  decision  by  said  circuit  court. 


20 


The  delay  of  this  case  in  the  circuit  court  is,  of  course,  a  matter 
entirely  beyond  the  control  of  this  Commission. 

The  action  of  the  circuit  court  of  Sangamon  County  in  sustaining 
the  motion  of  the  Springfield  Gas  &  Electric  Company  for  a  stay 
order  rendered  it  impossible,  under  the  Public  Utilities  Act,  for  the 
Commission  to  enforce  its  order.  Since  that  date  the  Commission 
has  been  without  power  to  do  any  act  with  reference  to  said  case  and 
without  responsibility  for  the  long  delay  in  the  circuit  court. 

Evidently  Mr.  McDonald,  in  making  this  criticism  against  the 
Commission  was  laboring  under  a  misapprehension  of  the  facts  and 
of  the  law.  The  Commission  feels  that  if  Mr.  McDonald  had  had  a 
correct  understanding  of  the  facts  and  of  the  law  he  would  not  have 
criticised  the  Commission. 


Mayor  McConchie  of  Rock  Island,  speaking  with  reference  to  a 
street  railway  case  pending  before  the  Commission,  stated  in  part  as 
f  lollows  (pp.  58-59)  : 

“Well,  we  went  to  Chicago,  like  a  man  going  to  the  gallows,  with 
fear  and  trembling.  We  got  up  there  into  a  large  court  room  where 
all  the  cases  were  on  the  docket,  and  we  were  ordered  to  meet  in  a 
certain  room  on  the  same  floor  of  that  building  at  1  o'clock ;  we  hap¬ 
pened  to  get  there  a  little  before  the  time,  and  the  door  was  not  open, 
and  we  were  all  crowded  in  a  little  narrow  hall,  all  strangers  to  each 
other,  except  our  friends  from  East  Moline  and  Silvis,  and  Mr.  Shaw 
was  there ;  he  was  the  commissioner  who  was  to  hear  our  case,  and 
I  heard  one  gentleman — and  several  of  our  people  heard  him — plead¬ 
ing  with  Air.  Shaw  to  hear  his  case  first.  ‘Well,’  he  says,  ‘I  will  hear 
you  in  just  five  minutes,  sir;  Rock  Island  is  the  first  on  the  docket, 
but  we  won’t  take  five  minutes  to  that,  there  is  nothing  to  it;  we  are 
going  to  grant  the  request  of  the  petitioners  and  give  them  a  ?-cent 
fare.'  Well,  we  were  naturally  amazed,  and  when  we  got  into  that 
hall,  when  the  door  was  opened,  we  made  such  a  howl  and  such  a  noise 
that  Mr.  Shaw  did  not  grant  it  in  that  five  minutes,  he  didn’t  grant  it 
that  day  and  he  has  not  granted  it  yet.  and  we  hope  to  see  him  out 
of  office  before  he  ever  gets  a  chance  to  grant  that  request.” 

Statement  of  Public  Utilities  Commission  as  to  above  charge. 

Mr.  McConchie’s  charges  relate  to  case  No.  8541,  which  involved, 
among  other  things,  a  proposed  increase  in  street  car  rates  in  Rock 
Island. 

The  hearings  in  this  case,  at  Chicago,  were  before  H.  M.  Slater, 
Transportation  Rate  Expert  of  the  Commission,  in  room  138. 

On  the  day  that  this  Rock  Island  case  was  heard  there  was 
another  case  also  assigned  to  Air.  Slater  for  hearing.  This  latter  case, 
(No.  8385),  it  appeared  to  Air.  Slater  would  take  but  a  short  time  to 
try,  so  he  announced  that  that  case  would  be  heard  first. 

The  Rock  Island  case  was  therefore  not  taken  up  until  1  p.  m. 
The  hearing  was  conducted  in  the  usual  way  by  Air.  Slater.  He  made 
no  statement  to  any  one  that  the  case  would  only  take  five  minutes 
and  that  the  request  of  the  petitioner  would  be  granted  and  it  would 


21 


be  given  a  seven-cent  fare.  Mr.  Slater  knew  the  case  would  involve 
a  lengthy  hearing  and  therefore  postponed  taking  it  up  until  the 
shorter  case  could  be  heard. 

Mr.  Slater  was  sitting  as  examiner  in  hearing  this  case  and  of 
course  had  no  power  or  authority  to  decide  the  case,  that  being  the 
function  of  the  Commission. 

Commissioner  Shaw  did  not  participate  in  any  way  in  the  hear¬ 
ing  of  this  case ;  he  was  not  in  the  room  at  any  time  while  it  was 
being  heard ;  and  at  no  time  nor  place  did  he  make  any  such  statement 
as  Mr.  McConchie  charges  him  with. 


Mr  .  Scott,  city  attorney  for  Rock  Island,  stated  in  part  as 
follows : 

(pp.  60-61)  “Let  me  give  you  one  example  of  what  occurred 
in  a  meeting  before  this  Utilities  Commission  in  Chicago.  We  were 
up  there  on  the  question  of  a  gas  rate ;  we  reposed  the  same  confi¬ 
dence  that  other  municipalities  do  in  the  integrity  of  the  engineers  of 
the  Commission.  We  went  in  there,  and  one  of  their  head  engineers, 
Mr.  Little,  came  in  with  a  report,  a  long  typewritten  report  that  took 
our  breaths  away,  and  we  were  wholly  helpless  before  it,  we  knew 
nothing  about  it.  If  it  were  a  mere  matter  of  legal  points  I  might 
have  done  something,  but  there  we  sat,  helpless ;  they  were  asking  us 
for  a  raise  from  85  cents  to  one  dollar  for  gas ;  I  had  not  the  slightest 
information  on  earth  what  the  report  would  be,  but  our  friends,  the 
enemy,  appeared  very  comfortable  and  self-satisfied,  and  they  sat 
there  apparently  without  much  feeling  of  misapprehension.  Mr.  Little 
testified  for  two  hours,  as  corroborated  by  his  evidence,  and  he  arrived 
at  this  amazing  conclusion,  after  a  complete  and  full  investigation,  he 
arrived  at  the  amazing  conclusion  that  the  Utilities  Company  was  not 
asking  for  enough,  that  in  fact,  as  a  result  of  his  investigation,  they 
were  losing  6  cents,  or  losing  more  at  the  burner  than  they  were  ask¬ 
ing  people  to  pay  for  the  gas.  Now,  that  conclusion  is  utterly  pre¬ 
posterous  and  impossible  on  the  face  of  it.  Either  one  of  two  things : 
That  engineer  was  not  sincere,  truthful  or  right  in  that  report,  or  else 
these  men,  who  had  been  running  that  utility  for  all  these  years,  were 
a  set  of  fools  and  imbeciles,  and  nobody  up  to  this  date  has  ever 
accused  them  of  being  that.  This  man  deliberately  sat  there  and  said, 
‘you  are  not  asking  for  enough/  an  utterly  impossible  situation,  and 
what  could  we  do  in  the  face  of  that?” 

Statement  of  Public  Utilities  Commission  as  to  above  charge. 

On  April  8,  1916,  the  city  of  Moline  filed  complaints  of  excessive 
charges  for  gas  and  electricity  furnished  by  the  Peoples  Power  Com¬ 
pany.  These  complaints  were  docketed  under  Nos.  4904  and  4905, 
respectively,  and  heard  on  May  2,  1916.  A  preliminary  order  requir¬ 
ing  the  company  to  file  a  complete  inventory  of  its  property  and  a 
detailed  statement  of  income  and  operating  expenses,  was  entered  on 
May  11,  1916.  On  the  following  day  the  city  of  Rock  Island  filed  a 
similar  complaint  requesting  similar  action  by  the  Commission. 


22 


On  May  25,  1916,  the  city  of  Moline  and  the  Peoples  Power 
Company  appeared  before  the  Commission  and  joined  in  a  motion  for 
the  dismissal  and  the  cancellation  of  all  orders  heretofore  made, 
together  with  a  stipulation  in  which  rate  schedules  for  both  gas  and 
electric  service  were  agreed  upon.  A  similar  motion  and  request  was 
filed  jointly  by  the  city  of  Rock  Island  and  the  said  company  on  the 
same  date.  These  schedules,  in  accordance  with  the  joint  request  of 
the  parties,  were  permitted  to  become  effective  in  Moline  and  Rock 
Island,  respectively,  as  of  July  1,  1916.  While  the  schedules  per¬ 
mitted  to  become  effective  resulted  in  reductions  for  both  gas  and  elec¬ 
tricity,  the  reduction  applicable  to  gas  was  substantially  fifteen  cents 
(15c)  per  thousand  cubic  feet,  or  a  reduction  from  one  dollar  ($1) 
to  eighty-five  cents  (85c)  net. 

The  reduction  of  rates  obtained  at  this  time,  while  a  matter  of 
stipulation  between  the  respective  cities  and  the  Peoples  Power  Com¬ 
pany,  was  the  result  of  prompt  action  taken  by  the  Commission  in 
requiring  the  company  (by  order)  to  file  a  complete  inventory,  etc.  In 
the  case  of  the  city  of  Rock  Island,  the  reduced  rates  were  made 
effective  in  less  than  two  months  after  their  complaint  was  filed. 

On  January  5,  1918,  the  Peoples  Power  Company  filed  a  petition 
setting  forth  that  on  account  of  the  abnormal  conditions  brought  about 
by  the  war,  an  increase  of  fifteen  cents  (15c)  per  thousand  cubic  feet 
for  gas  furnished  in  Rock  Island,  Moline,  East  Moline  and  Silvis,  was 
necessary.  The  new  schedule  of  rates  filed  was  substantially  the  same 
as  was  in  effect  previous  to  the  reduction. 

At  the  initial  hearing  on  this  petition  the  company  submitted  an 
appraisal  of  its  property  together  with  evidence  here  (and  statements) 
as  to  its  total  gross  income  and  operating  expenses.  The  value  of  the 
used  and  useful  property,  according  to  the  statement  submitted  by  the 
petitioner,  amounted  to  one  million,  six  hundred  sixty-six  thousand, 
seven  hundred  ninety-six  dollars  ($1,666,796). 

Following  this  hearing  the  Commission  instructed  its  engineering 
staff  to  make  an  investigation  of  the  property  and  records  of  the  com¬ 
pany.  The  result  of  this  investigation  was  presented  by  A.  S.  B.  Little, 
Gas  Engineer  of  the  Commission,  as  “Engineer's  Exhibit  1,”  at  a  hear¬ 
ing  held  in  Chicago  on  April  23,  1918.  Engineer  Little  was  cross- 
examined  on  his  report  at  this  hearing  by  counsel  both  for  the  com¬ 
pany  and  the  city  of  Rocklsland.  At  the  close  of  the  hearing  J.  K. 
Scott,  city  attorney  of  Rock  Island,  consented  to  the  entry  of  a  tem¬ 
porary  order  by  the  Commission,  pending  an  investigation  by  the  city ; 
counsel  for  the  city  to  notify  the  Commission  when  it  was  ready  to 
proceed. 

In  the  meantime,  the  Commission,  for  the  purpose  of  determining 
just  and  reasonable  rates,  found  from  all  the  evidence  in  the  case  a 
property  valuation,  for  the  purpose  of  this  proceeding,  of  one  million, 
four  hundred  fifty  thousand  dollars  ($1,450,000).  This  finding  was 
based  upon  what  the  Commission  believed  to  be  the  actual  investment. 

The  Commission  further  found  that  the  total  amount  required  to 
cover  the  annual  operating  expenses,  return  upon  the  fair  value  of  the 
property,  and  accruing  depreciation  was  four  hundred  forty  thousand, 


23 


five  hundred  eighty-eight  dollars  ($440,588),  or  equivalent  to  $1,049 
per  thousand  cubic  feet  of  gas  sold.  By  applying  the  rate  asked  by  the 
company  it  was  found  that  the  revenue  would  amount  to  four  hundred 
twenty-nine  thousand,  two  hundred  thirty-nine  dollars  ($429,239),  or 
approximately  eleven  thousand  dollars  ($11,000)  less  than  the  amount 
which  would  be  produced,  if  the  rate  of  $1,049,  tentatively  found  by  the 
Commission  during  investigation  had  been  applied. 

The  position  taken  by  the  Commission  was  that  the  public  should 
not  assume  all  the  burden  due  to  the  war,  and  for  that  reason  it  was 
found  that  the  rate  petitioned  for  by  the  company,  which  did  not  exceed 
one  dollar  ($1)  per  thousand  cubic  feet,  was  just  and  reasonable  and 
should  be  permitted  to  become  effective. 

In  accordance  with  the  understanding  at  the  conclusion  of  the  last 
hearing,  at  which  City  Attorney  Scott  appeared  for  the  city  of  Rock 
Island,  the  Commission  fixed  a  temporary  rate  effective  for  a  period  of 
not  more  than  one  year,  and  at  the  expiration  of  that  time  the  original 
rate  of  eighty-five  cents  (85c)  per  thousand  cubic  feet  would  auto¬ 
matically  go  into  effect  unless  otherwise  ordered  by  the  Commission. 

The  order  of  the  Commission  in  this  case,  advancing  the  rate, 
temporarily,  from  eighty-five  cents  (85c)  per  thousand  cubic  feet  to  one 
dollar  ($1)  per  thousand  cubic  feet,  was  to  meet  the  abnormal  operat¬ 
ing  expenses  due  to  the  war,  and  it  should  be  noted  Mr.  Scott’s  state¬ 
ment  contains  no  reference  to  this  very  important  fact. 


City  Attorney  Carey,  of  Decatur,  among  other  things,  said : 

(p.  64)  “I  think  I  may  safely  say  that  they  are  perhaps  a  year 
behind  right  now,  and  when  people  want  relief  they  don’t  care  to  put 
in  a  petition  before  the  Utilities  Commission  and  wait  a  year  before 
they  can  have  a  hearing  upon  it.” 

Statement  of  Public  Utilities  Commission  as  to  above  charge. 

Mr.  Carey’s  intimation  that  it  is  necessary  to  wait  a  year  after  the 
filing  of  a  petition  before  a  hearing  can  be  had  before  the  Commission 
is  emphatically  contrary  to  the  facts,  which  are  that  generally  every 
petition  filed  with  the  Commission  is  set  for  hearing  within  thirty  days 
after  the  date  of  filing.  If  Mr.  Carey  based  his  statement  upon  the 
experience  of  citizens  of  Decatur  interested  in  proceedings  before  the 
Commission,  his  statement  is  also  considerably  at  variance  with  the 
facts. 

Case  No.  4698  was  a  petition  filed  by  Phillip  Overstreet,  repre¬ 
senting  residents  and  employees  in  East  Decatur,  against  the  Decatur 
Railway  &  Light  Company,  seeking  an  extension  of  street  car  service. 
The  petition  was  filed  February  18,  1916;  heard  by  the  Commission  on 
April  5  and  21,.  1916;  and  an  order  was  entered  by  the  Commission  on 
May  4,  1916,  directing  the  extension  of  street  car  service. 

Case  No.  7607  was  another  petition  for  extension  of  street  car  serv¬ 
ice  filed  by  George  Weatherby,  et  ah,  against  the  Decatur  Railway  & 
Light  Company.  This  petition  was  filed  December  22,  1917,  and  on 
account  of  some  difficulty  relative  to  the  manner  in  which  the  petition 
was  drawn  the  case  was  not  set  for  hearing  until  March  5,  1918.  This 


24 


hearing  was  continued  until  April  17,  1918.  An  amended  petition  was 
filed  May  4,  1918,  and  the  case  was  further  heard  July  16,  1918.  Final 
briefs  were  not  filed  until  September  14,  1918,  and  the  Commission 
entered  an  order,  requiring  an  extension  of  service,  on  February  5, 
1919. 

Case  No.  7482  was  a  petition  for  separation  of  grades  filed  by  the 
city  of  Decatur  against  all  of  the  railroads  entering  that  city.  The  peti¬ 
tion  was  filed  December  14,  1917,  and  was  dismissed  along  with  several 
other  cases  of  similar  nature  on  March  20,  1918,  this  action  having 
been  taken  by  the  Commission  in  response  to  urgent  requests  of  the 
United  States  Government  that  only  the  most  essential  improvements 
should  be  ordered  during  the  period  of  the  war. 

Case  No.  7990  was  a  complaint  filed  by  E.  L.  Wheal,  et  ah,  against 
the  Wabash  Railway  Company  relative  to  a  grade  crossing  in  East  De¬ 
catur.  This  case  was  filed  April  8,  1918,  and  no  action  was  taken  by 
the  Commission  on  account  of  the  confusion  existing  relative  to  the 
jurisdiction  of  the  Commission  on  account  of  the  taking  over  of  the 
railroads  by  the  Federal  Government.  When  this  matter  was  in  part 
satisfactorily  adjusted,  early  this  year,  the  case  was  set  for  hearing  on 
February  4,  1919,  and  at  the  conclusion  of  the  hearing  on  that  date 
the  case  was  continued  for  further  hearing. 

Hearings  upon  many  applications,  petitions  and  complaints  are 
heard  well  within  thirty  days.  Whether  such  applications,  petitions  or 
complaints  are  set  for  hearing  within  thirty  days  depends  upon  many 
things :  The  volume  of  business  pressing  upon  the  Commission  for 
immediate  attention,  number  of  cases  on  the  docket,  the  convenience 
of  parties,  etc. 

Continuance  of  hearings  are  granted  in  numerous  cases,  particu- 
larlv  in  rate  hearings  involving  applications  of  utilities  for  increases. 
In  such  cases  the  applicant  usually  presents  tabulations  and  exhibits 
that  are  intricate  and  sometimes  meaningless  to  the  layman,  and  cities, 
villages,  or  other  organizations,  appearing  in  such  cases  for  the  con¬ 
sumers  or  patrons,  apply  for  and  are  given  ample  time  to  study  such 
tabulations  and  exhibits,  sometimes  with  the  aid  of  experts  and  attor¬ 
neys  employed  by  them,  and  sometimes  with  the  aid  of  the  Commis¬ 
sion’s  experts.  Important  and  intricate  cases  are  frequently  continued 
for  a  study  by  the  Commission’s  experts  to  aid  cities  and  villages  and 
organizations  or  associations  representing  consumers,  where  the  latter 
have  no  experts  nor  money  to  employ  them.  In  the  instance  last  men¬ 
tioned,  where  request  is  made  for  it,  the  Commission  always  assumes 
the  burden  in  behalf  of  such  interested  parties.  In  a  good  many  cases 
there  are  numerous  parties  and  interests  represented  and  dates  for 
hearings  have  to  be  fixed  to  accommodate  all  of  the  parties  to  the  pro¬ 
ceeding,  if  possible.  In  all  such  cases,  and  under  such  circumstances, 
delays  are  unavoidable,  and  in  a  great  majority  of  instances  for  the 
convenience  and  in  the  interests  of  consumers  or  patrons  of  public 
utilities. 


Mr.  Baker,  city  attorney  of  Shelbyville,  among  other  things,  said: 
(pp.  80-81)  “We  have  a  contract  with  the  City  Water  Company 
of  Shelbyville,  Illinois,  which  is  an  English  owned  concern,  and  the 


property  holders  all  live  in  England.  Our  contract  is  for  a  term  of 
twenty  years.  When  fourteen  years  of  the  time  had  expired  the  com¬ 
pany  made  an  application  to  the  Public  Utilities  Commission  of  the 
State  of  Illinois  substantially  doubling  rates  that  were  provided  for 
by  this  contract.  The  contract  specifically  states  it  is  a  contract 
between  the  parties  upon  the  faith  of  which  each  party  undertakes 
to  perform  the  various  things  they  were  obliged  to  perform  by  the 
terms  of  that  contract,  and  one  of  the  things  was  that  the  rate  shall  not 
exceed  a  certain  maximum.  They  began  in  its  inception  to  charge  the 
maximum  rate  and  continued  to  charge  it  for  fourteen  years  and  then 
made  application  to  the  Utilities  Commission  to  practically  double  the 
rates.  The  result  of  the  hearing  was  this,  and  I  want  to  say,  gentle¬ 
men,  that  I  am  blaming  no  member  of  the  Commission ;  I  could  blame 
no  member  of  the  Commission  for  the  outcome  of  that  case  because  no 
member  of  the  Commission  was  ever  present  while  the  hearing  was 
had.  It  was  heard  by  some  gentleman  that  I  never  heard  of  before,  I 
haven’t  seen  since,  and  I  don’t  know  what  his  official  capacity  was,  but 
the  result  of  the  hearing  was  this :  The  rates  were  substantially 
doubled.  The  hydrant  rental  to  the  city  of  Shelbyville  was  increased 
something  in  the  neighborhood  of  a  thousand  dollars  a  year.  The  find¬ 
ing  was  given  out  on  the  last  day  of  July  to  become  effective  on  the  1st 
day  of  September  of  1918. 

Our  annual  appropriation  ordinance  had  been  passed.  We  had 
appropriated,  as  required  by  law,  the  sum  that  we  expected  to  spend 
for  water.  We  have  levied  the  same  amount  in  July.  The  Utilities 
Commission  ordered  that  we  pay  a  thousand  dollars  more  than  that, 
and  upon  our  failure  to  pay  we  were  penalized  five  per  cent  for  not 
being  able  to  pay  it  when  we  could  not  pay  it.  We  had  no  way  of 
paying  it.” 

Statement  of  Public  Utilities  Commission  as  to  above  charge. 

With  respect  to  the  contract  that  Mr.  Baker  mentions  that  existed 
between  the  city  of  Shelbyville  and  the  Water  Company  fixing  rates, 
the  Public  Utilities  act,  as  adopted  in  1913,  and  as  it  now  stands,  re¬ 
poses  with  this  Commission  the  power,  and  charges  it  with  the  duty  of 
determining  just  and  reasonable  rates.  Pursuant  to  that  power  and 
that  duty,  the  Commission,  in  case  No.  7150,  entered  upon  an  investi¬ 
gation  and  determined  the  just  and  reasonable  rates  to  be  charged  by 
the  City  Water  Company  of  Shelbyville. 

The  Water  Company  applied  for  an  increase  in  rates  on  August 
20.  1917.  Final  order  of  the  Commission  in  this  case  was  entered  on 
Tuly  31,  1918,  and  prescribed  rates  to  become  effective  on  September 
1,  1918. 

The  hearing  in  this  case  was  conducted  by  Mr.  C.  M.  Tinney,  ex¬ 
aminer  for  the  Commission  ;  it  of  course  being  impossible  for  the  Com¬ 
mission  personally  to  hear  all  cases  brought  before  it. 

The  Commission  found  the  value  of  this  water  plant  to  be  one 
hundred  and  ten  thousand  dollars  ($110,000).  This  valuation  was 
based  upon  an  inventory  and  appraisal  made  by  an  employee  of  the 
Water  Company,  and  also  an  appraisal  of  the  physical  property  made 


26 


by  the  Commission's  engineering  staff,  which  latter  appraisal  was. on 
the  original  cost  basis. 

The  record  showed  that  under  the  rates  then  being  charged  the 
net  revenue — amount  available  for  interest  or  return  on  investment — - 
was  about  one  thousand,  six  hundred  dollars  ($1,600)  ;  that  the  only 
interest  being  paid  was  five  per  cent  on  twenty  thousand  dollars 
($20,000)  of  first  mortgage  bonds.  No  interest  was  being  paid  on 
some  ninety  thousand  dollars  ($90,000)  of  second  mortgage  bonds 
outstanding. 

The  old  rates  of  this  company  were  very  low,  but  the  consumers 
were  required  to  furnish  their  own  meters.  The  rates  established  are 
about  the  average  for  a  town  of  the  size  of  Shelbyville.  The  Commis¬ 
sion’s  order  directs  the  Water  Company  to  purchase  the  meters  of  the 
present  consumers,  and  provides  that  in  the  future  all  meters  shall  be 
furnished  and.  maintained  at  the  expense  of  the  Water  Company. 

As  to  the  hydrant  rentals,  the  record  showed  that  the  city  was  not 
paying  a  fair  share  of  the  operating  expenses  and  investment  charges 
in  hydrant  equipment,  and  that  an  equitable  distribution  of  the  required 
revenue  between  private  service  and  service  to  the  city  necessitated  that 
the  city  pay  an  increased  hydrant  rental. 

With  respect  to  the  criticism  that  the  hydrant  rental  rates  were  in¬ 
creased  subsequent  to  the  adoption  of  its  appropriation  ordinance  by 
the  city,  suffice  to  say  that  the  water  rates  of  this  company  were  under 
consideration  from  the  latter  part  of  August,  1917,  to  July  31,  1918,  all 
of  which  was  known  to  the  city,  as  it  was  represented  at  the  various 
hearings.  It  therefore  had  ample  opportunity  to  provide  funds  with 
which  to  pay  an  increased  hydrant  rental  that  might  be  determined  by 
the  Commission. 

An  appeal  from  the  Commission’s  order  in  this  case  was  taken  by 
the  city  of  Shelbyville,  but  was  dismissed  on  October  21,  1918,  for 
want  of  prosecution. 

ADMINISTRATION  OF  THE  LAW. 

The  Public  Utilities  Commission,  created  as  a  division  of  the  De¬ 
partment  of  Trade  and  Commerce  by  the  Civil  Administrative  Code, 
effective  July  1,  1917,  succeeded  to  the  rights,  powers  and  duties  vested 
by  law  in  the  State  Public  Utilities  Commission  under  an  act  entitled, 
“An  Act  to  provide  for  the  regulation  of  Public  Utilities,”  approved 
January  30,  1913,  in  force  January  1,  1914,  or  any  future  amendments 
thereto  or  modifications  thereof.  The  Civil  Administrative  Code  fur¬ 
ther  provides  that : 

Said  Act  and  all  amendments  thereto  and  modifications  thereof,  if  any, 
shall  be  administered  by  the  Public  Utilities  Commission  created  by  this  Act, 
and  in  its  name,  without  any  direction,  supervision,  or  control  by  the 
Director  of  Trade  and  Commerce. 

The  Public  Utilities  Commission,  of  Illinois,  is  passing  through  its 
probationary  period.  It  is  in  a  sense  unfortunate  that  this  period 
should  have  come  at  a  time  when  the  country  was  engaged  in  a  world 
war.  Illinois  is  now  experiencing  only  what  other  sates  which  pre¬ 
ceded  her  in  the  establishment  of  regulation  by  state  commissions  have 
experienced.  For  the  most  part,  those  states  have  passed  through  the 


27 


period  of  reaction  against  state  conrol  with  the  very  general  result  that 
commission  regulation  has  been  extended  and  reinforced. 

The  present  opposition  to  the  Public  Utilities  law  of  Illinois,  grow¬ 
ing  out  of  the  desire  for  “Home  Rule,”  is  not  unlike  that  also  experi¬ 
enced  in  other  states  during  the  early  years  of  state  commission  regu¬ 
lation  in  those  states.  The  present  situation  in  this  State  is  greatly 
aggravated,  however,  and  the  opposition  is  intensified  because  of  the 
abnormal  war  conditions  which  have  made  many  rate  increases  neces¬ 
sary,  temporarily,  during  the  past  year  and  a  half.  Most  of  the  ob¬ 
jection  to  the  non-observance  of  so-called  “ordinance  contracts”  or 
“franchise  contracts”  is  a  result  of  these  recent  rate  increases,  which, 
in  some  instances,  exceed  the  rates  provided  for  by  ordinance.  So  long 
as  the  Commission  reduced  rates,  even  when  fixing  a  rate  lower  than 
that  provided  for  by  ordinance,  no  objection  of  this  kind  was  raised  by 
the  municipalities  of  the  State.  For  these  reasons  the  whole  situation 
should  be  viewed  as  primarily  due  to  war  conditions. 

The  Commission  does  not  deem  it  proper  to  enter  into  an  extended 
discussion  of  the  relative  merits  or  demerits  of  regulation  by  a  state 
commission,  and  regulation  by  municipalities.  It  does  not  deem  it 
within  bounds  of  propriety  to  do  more  than  to  refer  briefly  to  its  work 
and  to  the  abnormal  conditions  prevailing  during  the  past  eighteen 
months,  which  in  a  large  measure  have  influenced  its  action. 

In  General. 

Every  state  in  the  Union,  except  Delaware,  now  has  a  state  com¬ 
mission  exercising  some  degree  of  control  over  public  utility  companies. 
Such  regulatory  bodies  have  also  been  established  in  the  District  of 
Columbia,  Hawaii,  and  the  Philippine  Islands.  Xo  Commission  has  ever 
been  abandoned  and  none  has  suffered  any  withdrawal  of  the  funda¬ 
mental  powers  or  jurisdiction  thereof.  On  the  contrary,  the  jurisdic¬ 
tion  and  powers  of  most  of  the  state  commissions  have  been  greatly 
extended  within  the  past  decade.  In  other  words,  the  uniform  tendency 
has  been  to  extend,  rather  than  to  restrict,  the  powers  and  jurisdiction 
of  the  public  utilities  commissions  of  the  various  states.  The  powers 
and  jurisdiction  of  these  various  state  commissions  are  not  identical, 
but  to  whatever  extent  they  go  are  quite  similar.  In  a  few  states, 
either  through  direct  statutory  provision  or  by  court  decision,  the 
commission  has  no  power  to  set  aside  the  terms  of  franchise  ordi¬ 
nances.  In  the  large  majority  of  the  states,  however,  the  commission 
has  the  sole  power  to  fix  rates.  The  general  situation  as  it  exists 
today  throughout  the  country  is  an  emphatic  endorsement  of  state 
regulation  as  opposed  to  local  control  over  public  utilities. 

Illinois  Legislative  Public  Utilities  Committee. 

As  a  result  of  the  general  agitation  throughout  the  State  for  the 
establishment  of  some  definite  form  of  public  utility  regulation,  the 
Forty-Seventh  General  Assembly  created  a  joint  committee  to  in¬ 
vestigate  public  utilities,  known  as  the  Illinois  Legislative  Public  Utili¬ 
ties  Committee.  Much  of  the  report  of  that  Committee  is  apropos  in 
the  present  discussion  relative  to  proposed  amendments  to  the  law. 
Among  other  things,  that  report  says : 


28 


The  creation  of  a  committee  to  investigate  the  desirability  of  a  public 
utility  law  for  the  State  of  Illinois  was  born  out  of  a  desire  to  render  a 
substantial  and  lasting  service  to  the  people  of  this  State.  In  the  last  decade 
there  have  been  various  attitudes  of  public  opinion  toward  public  service 
corporations.  Some  years  ago  the  disposition  of  municipal  councils  and 
bodies  granting  franchises  was  to  stimulate  the  development  of  utility  com¬ 
panies  by  granting  extensive  rights  and  privileges,  with  little  regard  to 
future  conditions,  and  with  little  complaint  on  the  part  of  the  public.  In 
many  cases  these  grants  were  honestly  but  mistakenly  made;  in  other  cases 
they  were  subject  to  suspicion  of  corruption.  The  people  have  witnessed 
abnormal  and  unreasonable  profits  derived  by  utility  corporations,  out  of  the 
delegation  of  franchise  rights  that  originally  belonged  to  the  people;  they 
have  witnessed  the  evils  of  the  issuance  of  fictitious  securities,  and  exactions 
from  the  public  resulting  from  watered  securities,  in  the  form  of  inadequate 
service  or  extortionate  rates.  In  many  instances  they  have  witnessed  a  con¬ 
temptuous  disregard  for  the  rights  of  the  public,  unmindful  of  the  fact  that 
these  companies  owe  their  right  to  exist  and  do  business  to  the  State  and 
the  municipality.  Primarily,  there  are  interested  in  these  questions  the 
great  public  itself,  the  patrons  of  the  utility  concern,  and,  finally,  those  hav¬ 
ing  capital  invested  therein. 

Its  investigation  took  the  Illinois  Legislative  Public  Utilities  Com¬ 
mittee  through  the  State  of  Illinois,  visiting  twenty-nine  municipalities. 
The  Committee  also  visited  some  of  the  principal  states  in  the  Union, 
holding  joint  meetings  with  public  utilities  commissions  of  these  states. 
The  investigation  was  exhaustive. 

The  Committee  made  its  recommendations  in  the  following 
manner : 

After  an  exhaustive  inquiry  on  this  subject  in  Illinois  and  in  other 
states  in  the  Union,  your  committee  is  firmly  convinced  that  State  regulation 
of  public  utilities  would  bring  the  best  service  to  the  citizens  of  Illinois. 

A  majority  of  your  committee  believes  that  there  should  be  but  one 
commission  for  the  entire  State  exercising  jurisdiction  over  all  utilities 
enumerated  in  the  bill  presented  herewith. 

Your  committee  is  strongly  opposed  to  two  commissions  for  reasons 
heretofore  assigned  and  for  the  further  reason  that  two  commissions  would 
inevitably  lead  to  conflict  of  authority.  Single  utilities  companies  extending 
beyond  the  limits  of  a  municipality  would  in  all  probability  be  subject  to 
the  conflicting  orders  and  policies  of  two  commissions.  Two  commissions 
would  make  uncertain  the  decisions  of  the  commissions,  since  in  rendering 
opinions  upon  same  subjects,  they  would  frequently  disagree  or  pursue  dif¬ 
ferent  policies  and  therefore,  like  opinions  of  the  Appellate  Courts  of  this 
State,  their  findings  would  not  serve  as  precedents  but  would  lead  to  constant 
embarrassment  of  both  municipalities  and  public  service  corporations. 

In  this  connection  it  seems  pertinent  to  inquire  what  would  be  the 
general  effect  of  the  adoption  of  the  proposed  amendments  to  the 
Utilities  law  which  would  make  it  possible  to  create  as  many  commis¬ 
sions  within  the  State  as  there  are  cities,  villages  and  incorporated 
towns. 

Home  Rule. 

There  has  been  little  practical  application  of  the  Municipal  “Home 
Rule”  principle  to  public  utilities  regulation  in  the  United  States. 
Though  there  are  in  a  number  of  states  laws  in  effect  providing  for 
“Home  Rule,”  few  of  these  laws  extend  the  “Home  Rule”  idea  to  the 
regulation  of  public  utilities.  The  State  of  Missouri  was,  and  the  State 
of  California  is,  an  exception  to  this  rule.  The  General  Assembly  of 
the  State  of  Missouri,  in  the  year  1907,  conferred  the  power  of  regu- 


29 


lating  the  rates  of  street  railway,  telephone,  electric  light,  gas,  water 
and  heating  companies,  upon  the  cities  of  the  State ;  but  regulation  by 
the  cities  was  found  to  be  unsatisfactory  and,  in  1913,  the  act  con¬ 
ferring  powers  upon  the  cities  was  repealed  and  the  power  of  regulation 
was  vested  in  the  Public  Service  Commission  of  that  State. 

Control  and  regulation  of  public  utilities  by  municipal  commissions 
has  been  exercised  by  a  few  cities  only.  Kansas  City,  Missouri,  was 
one  of  the  first  municipalities  to  organize  a  city  public  utilities  com¬ 
mission.  Acting  under  the  Missouri  Home  Rule  act,  the  Kansas  City 
Council,  in  1908,  organized  a  commission  of  seven  members,  vested 
with  power  to  investigate  utility  matters  and  make  recommendations  as 
to  service  and  rates.  The  number  of  commissioners  was  soon  reduced 
to  three,  and  after  an  uneventful  experience  the  commission  passed  out 
of  existence. 

The  Public  Service  Commission  of  the  city  of  St.  Louis,  Missouri, 
was  created  in  1909,  under  the  Missouri  Home  Rule  law,  with  three 
members,  having  power  to  conduct  investigations  and  make  reports  as 
to  service  and  rates.  Extensive  valuations  of  the  city’s  utilities  were 
undertaken  and  the  commission  incurred  much  criticism  for  apparently 
unreasonable  delays.  By  the  time  the  work  was  completed  jurisdiction 
over  the  public  service  companies  of  all  municipalities  in  Missouri  had 
passed  from  the  municipalities  to  the  Public  Service  Commission  of 
Missouri  through  the  enactment  of  the  Public  Service  Commission  law 
of  that  State,  in  the  year  1913. 

The  city  of  Los  Angeles,  California,  organized  a  Commission  of  its 
own  in  the  year  1909.  A  Commission  of  three  .members  was  created, 
with  power  to  control  service  and  make  recommendations  as  to  rates. 
The  Commission’s  first  important  report,  carrying  a  fair  estimate  of 
reasonable  rates,  raised  such  a  storm  of  public  protest  that  the  entire 
Commission  resigned  on  June  30,  1911.  In  spite  of  the  statutory  pro¬ 
vision  which  made  it  possible  for  the  city  of  Los  Angeles  to  continue 
“Home  Rule”  of  its  utilities,  if  it  so  determined,  on  August  9,  1915, 
rate  control  over  the  utilities  of  that  city  was  transferred  to  the  Rail¬ 
road  Commission  of  California. 

All  incorporaed  cities  in  California,  about  two  hundred  and  fifty 
in  number,  had  jurisdiction  over  public  utilities  in  the  respectve  cities, 
including  the  power  of  rate  making,  up  to  November,  1914,  when  the 
rate  making  power  was  transferred  to  the  Railroad  Commission.  By 
constitutional  amendment,  the  city  of  Los  Angeles  only  now  has  a  local 
commission,  without  rate  making  power.  The  California  Commission 
now  has  complete  rate  fixing  power  in  entire  state,  all  incorporated 
cities  included. 

At  the  present  time  there  is  no  city  commission  in  the  United 
States  exercising  jurisdiction  over  the  rates  of  public  utilities. 

In  the  course  of  its  report  the  Illinois  Legislative  Public  Utilities 
Committee  had  the  following  to  say  with  reference  to  the  doctrine  of 
“Home  Rule.” 

The  relation  of  the  city  to  the  State  is  somewhat  analogous  to  the  rela¬ 
tionship  existing  between  the  State  and  Federal  Government,  except  that 
the  State  retains  all  power  not  ceded  to  the  Federal  Government,  and  the 
cities  have  only  such  powers  as  are  expressly  conferred  upon  them  by  the 


30 


statutes  of  the  State.  Upon  the  State  devolves  the  duty  of  protecting  its 
citizenship,  and  while  matters  solely  concerning  the  city  may  be  absolutely 
left  to  local  regulations,  yet,  where  the  scope  or  sphere  of  influence  of  any 
agency,  moral,  financial,  or  in  any  manner  extends  beyond  the  limits  of  a 
municipality,  the  State  should,  under  the  exercise  of  its  police  power  exer¬ 
cise  such  supervisory  control  as  will  inure  to  the  benefit  of  the  State,  as  a 
whole. 

The  authority  of  the  State  in  the  conservation  of  the  public  good  should 
not  yield  to  mere  phrases  or  irrelevant  axioms.  The  incitation  of  the  doc¬ 
trine  of  “Home  Rule’’  should  not  preclude  the  sovereign  State  from  the 
exercise  of  rightful  authority.  If  the  intrusion  of  those  interested  in  public 
service  corporations  into  the  domain  of  municipal  and  State  politics  is  patent, 
the  State  ought  to  and  should,  by  appropriate  action,  invoke  its  authority  to 
avert  such  malign  influence.  If  municipalities  are  incapable  of  protecting 
their  citizens  for  any  reason  from  unjust  exactions  of  public  service  corpo¬ 
rations  it  is  the  duty  of  the  State  to  protect  them  in  such  manner  as  it  deems 
right  and  proper. 

Conversely,  if  the  citizens  of  any  municipality,  through  their  represen¬ 
tatives,  take  such  action  as  will  destroy  or  confiscate  public  utility  invest¬ 
ments,  it  is  likwise  the  duty  of  the  State  to  assert  its  paramount  authority 
to  the  end  that  justice  may  be  accorded  to  citizens  interested  in  such  con¬ 
cerns,  whether  their  interests  be  large  or  small.  *  *  *.  It  is  unneces¬ 

sary  to  multiply  instances  to  illustrate  this  doctrine.  Not  only  is  it  estab¬ 
lished  by  the  settled  policy  of  this  State  but  its  application  has  been  extended 
to  the  regulation  of  public  utility  companies  by  practically  all  the  pro¬ 
gressive  states  of  the  Union. 

Discussing  the  plan  of  permitting  cities  to  confer  upon  or  with¬ 
draw  power  from  the  State  Commission,  at  will,  as  provided  for  in  the 
proposed  amendments  to  the  act,  the  Illinois  Legislative  Public  Utilities 
Committee’s  report  contains  the  following: 

The  California  law  permits  municipalities  to  confer  upon,  or,  after  it 
has  been  conferred,  to  withdraw  power  from  the  state  commission,  ad 
liMtem.  This  provision  of  the  California  law  is  uniform  in  that  it  aoplies  to 
all  municipalities  of  the  State,  regardless  of  size.  This  feature  of  the  Cali¬ 
fornia  law  is  experimental.  The  excerpts,  heretofore  given  from  an  address 
of  the  president  of  the  California  commission,  indicate  that  this  division 
of  authority  does  not  meet  with  his  approval. 

Under  such  a  system  of  regulating  it  is  likely  that  a  condition  of  chaos 
will  arise.  Prudence  should  dictate  that  such  a  provision,  repugnant  to 
efficient  regulation,  should  not  be  incorporated  in  the  proposed  Illinois  law. 
The  suggestion  has  been  made,  and  has  been  strongly  advocated,  that  all 
utilities  in  Illinois  cities  under  a  certain  population  should  be  regulated 
compulsorily  by  a  State  commission  and  that  all  utilities  in  cities  above 
such  certain  population  should  be  regulated  either  by  the  city  or  by  the 
State  Commission  as  may  be  determined  by  the  electors  of  such  city — the 
right  to  confer  upon  or  withdraw  power  from  the  State  Commission  to  be 
optional  with  such  municipalities. 

Under  such  a  form  of  regulation  single  interurban  utilities,  such  as 
gas,  electric  light  and  water  companies,  supplying  suburban  communities 
and  adjoining  municipalities,  could  be  subjected  to  the  regulation  of  the 
State  Commission  and  various  cities  acting  independently  of  the  State  Com¬ 
mission.  This  would,  of  necessity,  destroy  all  uniformity  of  regulation,  and 
tend  to  defeat  the  very  purposes  for  which  such  legislation  is  proposed.  The 
larger  cities  of  the  State  contain  plants  for  supplying  outlying  territory  and 
municipalities  with  public  utility  commodities.  This  condition  applies  not 
only  to  Chicago  but  in  a  lesser  degree  to  Peoria,  Springfield  and  the  other 
large  cities  of  the  State.  If  these  larger  cities  of  the  State  do  not  accept  the 
authority  of  the  State  Commission,  and  the  smaller  communities  supplied 
therefrom  are  compelled  to  accept  State  regulation  by  a  mandatory  law,  or  do 
so  under  permissive  authority  of  law,  the  smaller  communities  will  be  placed 
entirely  at  the  mercy  of  the  larger  cities.  By  rate  restrictions  and  other 


31 


means  of  regulation  of  the  larger  cities,  decreasing  the  earning  power  of 
utility  companies,  burdens  in  the  form  of  excessive  rates  or  diminished 
service,  or  both,  will  be  imposed  upon  the  smaller  communities  of  the  State. 
Thus,  in  an  effort  to  secure  local  control  over  utilities  serving  different  locali¬ 
ties,  the  right  of  invasion  of  outside  territory  and  the  rights  of  citizens 
therein  will  be  established  by  the  Legislature.  The  remarks  of  the  president 
of  the  California  commission,  upon  this  question,  are  applicable  here:  “If 
the  inhabitants  of  a  city  were  wholly  devoid  of  selfishness  and  also  omnis¬ 
cient,  then  those  people  who  are  so  unfortunate  as  to  live  outside  the  bounda¬ 
ries  of  such  city  might  have  no  fear  that  any  act  performed  by  the  govern¬ 
mental  authority  of  such  city  would  be  detrimental  to  the  interests  of  any¬ 
one.  But  1  have  a  suspicion  that  the  same  selfishness  which  we  find  in  the 
individual  premeates  aggregations  of  individuals,  and  that  a  city  may  some¬ 
times  do  those  things  within  its  boundaries  which,  although  advantageous 
to  its  inhabitants,  are  detrimental  to  others.  We  have  heard  much  in  our 
history  of  taxation  without  representation.  Regulation  by  a  city  winch 
directly  or  indirectly  serves  to  regulate  the  affairs  of  others  without  the  city 
is  as  to  these  others  regulation — which  is  a  form  of  taxation — without  rep¬ 
resentation,  and  has  the  same  injustice  inherent  therein  as  taxation  without 
representation.  Therefore  we  must  be  very  slow  to  make  up  our  minds  that 
a  city  should  have  the  right  to  regulate  the  affairs  of  a  utility  operating 
within  the  city,  but  likewise  serving  its  commodity  to  other  sections,  until 
it  appears  that  the  action  of  such  city  can  not  work  injustice  to  the  other 
patrons  of  the  utility  to  be  regulated. 

The  smaller  municipalities  of  the  State  would,  by  basing  their  rights 
with  reference  to  public  utility  regulation  solely  upon  the  question  of  popula¬ 
tion,  be  deprived  of  privileges  conferred  upon  the  larger  cities  of  the  State. 
The  rights  of  patrons  of  public  utilities,  whether  residents  of  large  or  small 
cities,  are  identical;  the  right  of  a  citizen  to  the  cheapest  and  best  service 
from  a  public  utility  company,  compatible  with  a  fair  return  to  the  investor, 
should  not  be  made  to  depend  upon  the  size  of  the  city  where  he  lives,  or 
whether  he  lives  in  a  metropolis  or  a  village.  Any  arbitrary  and  discrimin¬ 
atory  method  or  regulation  between  the  citizens  of  the  State,  because  of  resi¬ 
dence,  would  in  the  judgment  of  the  committee,  be  repugnant  to  the  Consti¬ 
tution,  and  render  any  law  containing  such  provision  void  in  toto. 

Even  though  such  a  law  gave  all  cities  the  same  option  to  confer  upon 
or  withdraw  authority  from  the  State  Commission,  it  might  result  in  the 
creation  of  very  expensive  machinery  for  the  administration  of  the  law  with 
very  few  cities  choosing  to  come  under  the  provisions  of  the  law.  Again, 
part  of  the  cities  of  the  State  would  have  the  bond  and  stock  issues  of  utility 
companies  regulated  by  the  State  Commission,  while  the  utility  stocks  and 
bonds  of  other  cities  would  not  be  regulated  by  State  law.  It  cannot  be 
conceived  that  legislation  will  be  urged  which  will  provide  for  the  regulation 
of  stock  and  bond  issues  of  all  utility  corporations  by  a  State  Commission, 
leaving  part  of  the  companies  to  have  rates  regulated  by  cities,  (State  Com¬ 
missions)  and  another  part  to  have  rates  regulated  by  city  councils.  Such  a 
division  of  authority  would  be  inconsistent,  illogical  and  unscientific. 

Under  the  code  of  Iowa  the  municipalities  of  Iowa,  through  their 
councils,  have  the  full  right  to  fix  and  regulate  rates  of  public  utilities. 
This  system  of  utility  regulation  and  control  has  proven  unsatisfactory 
in  Iowa.  The  Thirty-First  General  Assembly  of  that  state  had  under 
consideration  the  amendment  of  the  laws  upon  the  subject.  The  Com¬ 
mittee  on  Public  Utilities  of  the  Thirty-Eighth  General  Assembly  of 
Iowa  directed  to  Martin  J.  Wade,  judge  of  the  United  States  District 
Court,  of  the  Southern  District  of  Iowa,  a  communication  requesting 
his  views  in  regard  to  a  Public  Utility  bill.  The  reply  of  Judge  Wade 
is  so  forceful  and  conclusive  that  the  Commission  deems  it  within  the 
bounds  of  propriety  to  insert  it  in  this  statement,  as  follows : 


32 


Gentlemen:  I  have  been  asked  by  your  committee  to  make  a  state¬ 
ment  of  my  views  in  regard  to  a  public  utility  bill.  I  can  not  go  into  details, 
nor  do  I  wish  to  appear  as  a  supporter  of  any  particular  measure;  but  I  sub¬ 
mit  the  following  suggestions: 

(1)  The  fixing  of  rates  of  a  city  council  elected  by  the  people  who  pay 
rates  for  lighting  or  other  service — a  council  composed  of  men,  who,  them¬ 
selves,  are  paying  the  rates  for  such  service,  is  fundamentally  wrong.  No 
man  is  big  enough  to  be  a  judge  in  his  own  case.  I  do  not  care  how  honest 
he  is;  human  nature  is  such  that  he  is  not  qualified  to  be  his  own  judge. 
Even  if  he  decided  right,  the  other  party  to  the  controversy,  realizing  his 
self-interest,  would  probably  be  dissatisfied  with  the  result. 

In  answer  to  this  suggestion  it  has  been  said,  that  this  theory  would 
take  away  from  the  city  council,  or  the  people  of  the  community,  the  right 
to  determine  the  amount  of  their  own  taxes,  etc.  This  suggestion  is  without 
merit.  In  fixing  taxes,  the  city  council,  or  the  people  of  the  community,  are 
only  fixing  the  amount  of  taxes  which  they  themselves  shall  pay,  within 
limits  defined  by  the  law,  or  by  the  board  of  supervisors,  and  in  such  mat¬ 
ters  they  are  acting  where  there  is  no  “controversy.”  No  one  would  con¬ 
tend  that  if  a  man,  or  a  community,  had  a  “controversy,”  or  “dispute”  about 
taxes,  that  they  themselves  should  settle  that  dispute.  No  judge  would  sit 
in  any  case  involving  a  dispute  over  taxes  which  he  himself  was  to  pay,  nor 
would  any  judge  sit  in  any  case  which  involved  the  rate  which  he,  as  one  of 
the  community  was  to  pay,  for  light  or  other  commodity.  In  fact,  he  would 
be  legally  disqualified. 

The  matter  of  fixing  rates  for  public  service  involves  no  difficulty  unless 
there  is  a  controversy  between  the  community  and  the  utility  company. 
When  a  controversy  does  arise,  I  insist  that  under  the  American  principle — 
the  principle  of  representative  government,  both  parties  are  entitled  to  a 
judgment  in  that  controversy,  by  a  disinterested  man,  or  body  of  men.  This 
lies  at  the  foundation  of  our  whole  system  of  law  and  order. 

It  is  important,  not  only  that  a  man  shall  have  just  determination  of  a 
dispute  which  he  has  with  his  neighbor,  but  it  is  highly  important  that  a 
settlement  of  such  dispute  shall  be  such  that  he  will  have  confidence  in  the 
result,  even  though  he  loses. 

(2)  Present  Methods  Intolerable.  The  people  do  not  realize  the  extent 
of  the  fault  of  the  present  system.  Under  the  Iowa  law,  not  only  is  the  city 
council  given  the  power  to  fix  rates,  but  such  power  is  exclusive.  There  is 
no  way  of  getting  the  matter  before  any  other  person  or  body  of  persons  for 
determination. 

The  general  notion  is,  that  the  court  can  fix  the  rate,  but  this  is  without 
foundation.  A  court  can  not  fix  a  rate  for  any  public  service.  All  that  a 
court  can  do  is  to  enjoin  the  enforcement  of  a  rate  fixed  by  a  council,  when 
it  is  shown  that  such  rate  is  unreasonable  to  the  extent  that  it  violates  Sec¬ 
tion  14  of  the  Constitution  of  the  United  States  by  confiscating  the  property 
of  the  company— by  forcing  the  Company  to  take  a  rate  which  will  not  be 
reasonable  interest  upon  the  investment. 

But  what  then?  The  city  council  passes  a  rate  of  $1.50.  The  court 
enjoins  it  as  confiscatory,  but  there  it  stops.  The  council  can  then  adopt  an 
ordinance  fixing  the  rate  of  $1.51.  Another  injunction  may  restrain  that, 
and  the  council  can  repeat  the  process,  raising  it  a  few  cents  each  time, 
indefinitely,  until  a  reasonable  rate  is  reached.  This  is  not  mere  theory — it 
has  been  done  just  in  this  way. 

In  connection  with  the  foregoing,  and  so  that  there  may  be  no  misun¬ 
derstanding,  it  is  proper  to  say,  that  because  of  orders  made  in  many  dif¬ 
ferent  cases,  granting  temporary  injunctions,  where  a  maximum  rate  was 
fixed,  a  great  many  people  have  the  notion  that  the  court  has  been  fixing 
rates;  but  this  is  not  true.  The  court  has  the  power,  upon  granting  a 
temporary  injunction,  to  restrain  the  enforcement  of  an  ordinance  fixing  a 
rate,  to  fix  the  maximum  which  the  company  shall  charge  pending  the 
temporary  injunction,  until  final  hearing  of  the  case.  But  this  is  always 
under  a  requirement  for  a  bond  to  secure  to  the  persons  using  the  public 


33 


service,  a  return  of  every  dollar  collected  which  is  not  ultimately  determined 
to  be  just,  legal,  reasonable  rate. 

(3)  Expense  of  Determination  Under  Present  Law  Wasteful  and  Un¬ 
necessary.  It  is  no  small  matter  upon  a  hearing  before  the  court  to  enjoin 
a  rate,  or  to  have  the  facts  determined.  In  most  of  the  cases  which  have 
been  tried  in  this  State,  it  has  taken  days  and  weeks,  and  in  some  cases, 
months,  with  the  testimony  of  experts  brought  from  many  states,  before  a 
final  determination  could  be  made.  Such  expense  is  almost  prohibitive  for 
many  small  communities.  In  a  case  now  pending  before  me,  the  town  has 
announced  that  it  cannot,  and  will  not,  undertake  the  expense  to  try  the 
case,  but  will  let  it  go  by  default;  and  the  difficulty  is,  that  when  final  adjudi¬ 
cation  is  made  by  the  court,  it  settles  nothing  except  with  relation  to  the 
particular  ordinance  involved;  and  if  the  fighting  disposition  is  sufficiently 
strong  on  both  sides,  the  same  process  may  have  to  be  gone  through  again 
in  six  months. 

(4)  The  Real  Rate  Difficulty.  In  truth,  there  isn’t  much  difficulty  in 
fixing  rates,  except  as  the  controversy  necessarily  goes  into  the  question  of 
the  investment  of  the  company,  upon  which  it  is  entitled  to  earn  interest. 
The  rate  of  interest  to  be  earned  will  not  ordinarily  be  much  in  dispute.  The 
American  people,  not  only  in  the  communities,  but  upon  the  farms,  are,  in 
my  judgment,  willing  that  capital  invested  in  public  utilities  shall  earn  a 
fair  rate  of  interest,  and  whether  it  shall  be  7,  or  8,  or  9  per  cent,  could 
easily  be  solved  or  compromised.  But  the  real  difficulty  is  the  investment — 
the  exaggerated  claims,  upon  the  one  hand  in  some  cases,  the  suspicion  upon 
the  other  hand,  that  values  are  exaggerated;  the  cry  “watered  stock” — the 
feeling  that  the  public  is  asked  to  pay  interest  on  something  that  is  not 
there.  Once  the  question  of  what  the  investment  is  worth  is  settled,  the 
balance  is  “easy.”  The  difficulty  with  our  present  system  is  that  there  is  no 
wray  of  getting  the  value  of  the  investment,  finally  and  permanently  deter¬ 
mined.  An  inquiry  into  this  subject  in  an  ordinary  trial,  is  only  for  the 
purpose  of  that  particular  trial.  The  court  makes  no  record  and  no  finding, 
binding  upon  anybody,  as  to  the  value  of  the  investment,  and  every  time  a 
controversy  arises,  a  new  inquiry  must  be  made.  A  utilities  commission 
would  in  the  nature  of  things,  ultimately  be  called  upon  to  fix  valuations  of 
these  utility  companies.  Such  valuations  would  go  in  their  record  and 
furnish  a  permanent  basis  for  all  future  considerations,  because  if  a  valua¬ 
tion  were  made  five  years  ago,  and  the  books  required  to  be  properly  kept, 
the  present  valuation  would  be  largely  a  mere  matter  of  computation.  Every¬ 
body  would  know  the  value  upon  which  interest  had  to  be  earned;  everybody 
would  understand  why  a  rate  was  raised  or  lowered.  It  would  prevent  any 
claim  of  fictitious  value — it  would  eliminate  stock  watering — it  would  give 
to  the  securities  of  the  utility  companies  a  stability  which  would  protect 
against  financial  disaster.  In  other  words,  it  would  establish  a  business 
basis  upon  which  the  relations  between  the  company  and  the  people  would 
rest,  and  with  reference  to  which  all  their  negotiations  would  be  handled. 
I  apprehend  that  in  ten  years,  law  suits  over  rates  would  be  out  of  all  courts. 

(5)  And  most  important  of  all  is,  that  it  would  take  the  rate  question 
out  of  local  politics.  It  would  eliminate  the  feeling  of  suspicion,  antagonism, 
and  even  rebellion,  which  is  so  prevalent  when  these  controversies  arise. 

It  is  of  the  highest  importance,  especially  in  these  times,  that  our  legis¬ 
lation  shall  be  such  that  everybody — no  matter  how  ignorant  he  may  be,  may 
understand  the  basis  of  public  and  legal  action,  because  confidence  in  the  law 
and  in  its  administration  is  the  most  important  asset  of  this  Republic. 

Finally:  Any  suggestion  that  it  is  impossible  for  the  legislature  to 
devise  a  method  by  which  just,  fair  men  can  be  selected  for  such  a  commis¬ 
sion,  is  in  conflict  with  our  whole  theory  of  government.  When  the  time 
comes  that  men  can  not  be  selected  as  disinterested  judges  in  disputes 
between  their  neighbors,  our  whole  system  falls. 

State  Public  Utilities  Commission. 

The  framers  of  the  Public  Utilities  act,  of  Illinois,  had  the  ad- 


34 


vantage  of  the  experience  of  other  states  to  guide  them  in  its  prepar¬ 
ation.  It  embodies  many  of  the  features  of  the  Interstate  Commerce 
Act,  which  were  deemed  applicable,  and  embraces  the  best  provisions 
of  other  state  laws.  The  scope  of  the  Illinois  law  is  not  exceeded  by 
that  of  any  other  similar  state. 

Some  idea  of  the  work  accomplished  by  the  Commission  may  be 
suggested  by  the  statement  that,  during  its  administration  the  Com¬ 
mission  has  disposed  of  six  thousand,  three  hundred  and  fifty-nine 
formal  petitions  and  complaints.  Of  this  number,  two  thousand,  seven 
hundred  and  twenty  were  disposed  of  without  hearings,  and  three 
thousand,  six  hundred  and  thirty-nine  went  to  hearing. 

In  addition  to  the  formal  matters  handled  by  the  Commission, 
more  than  three  thousand,  five  hundred  and  eighty  informal  complaints 
have  been  adjusted  by  the  Commission,  by  correspondence  or  confer¬ 
ence  with  parties  complaining  and  utilities  officials. 

The  following  table  shows  the  character  and  number  of  informal 
complaints  filed  from  January  1,  1914,  to  March  4,  1918: 


INFORMAL  COMPLAINTS 


Relating  to 

Rates. 

Service. 

Misc. 

Total 

S’team  Railroads . 

681 

731 

314 

1,726 

Electric  Railroads . 

41 

131 

31 

203 

Express  Companies . 

33 

37 

4 

74 

Water  Carriers . 

3 

2 

0 

5 

Electric  Utilities . 

260 

308 

27 

595 

Gas  Utilities . 

131 

65 

1 

197 

Heating  Utilities . 

16 

6 

0 

22 

Telephone  &  Telegraph . 

127 

485 

31 

643 

Water  Utilities . 

52 

37 

3 

92 

Warehouses  . 

15 

5 

1 

21 

Bus  Lines  .  .  .  .- . 

2 

0 

0 

2 

Total  . 

1,361 

1,807 

412 

3,580 

Special  Committee  on  Public  Utilities. 

On  January  20,  1917,  the  Special  Committee  on  Public  Utilities 
of  the  Forty-ninth  General  Assembly,  appointed  to  investigate  the 
sentiment  of  municipalities  of  the  State  with  reference  to  the  work 
of  the  Commission,  presented  its  report.  In  that  report  the  Committee 
said : 

With  reference  to  the  attitude  of  the  people  outside  the  city  of  Chicago 
toward  the  control  of  down-state  utilities  by  the  State  Public  Utilities  Com¬ 
mission,  the  committee  finds  that  the  scheme  of  control  introduced  by  the 
Act  of  1913  has  met  with  almost  universal  approval.  While  some  complaints 
were  heard,  particularly  with  reference  to  delays  in  matters  pending  before 
the  State  Commission,  the  general  feeling  throughout  the  State  is  that  the 
control  of  utilities  outside  of  the  city  of  Chicago  by  the  State  Commission  is 
working  well  and  the  people  would  be  more  than  reluctant  to  return  to  the 
old  system. 

Through  the  agency  of  the  State  Commission  and  its  corps  of  experts, 
the  people  of  the  smaller  municipalities  and  the  rural  districts  are  now  able 
to  meet  on  equal  terms  the  utilities  with  their  great  resources.  *  *  *. 


35 


Rate  Reductions. 

It  will  thus  be  seen  that  after  three  years  of  the  Commission’s 
administration  of  the  Public  Utilities  Law  there  appeared  to  be 
throughout  the  State  general  satisfaction  with  the  work  of  the  Com¬ 
mission  and  the  operation  of  the  law.  This  was  a  period  of  general 
rate  reduction.  During  these  years  conditions  were  practically  normal 
and  as  a  result  of  the  Commission’s  investigation  and  action  upon  rate 
matters  there  was  a  general  reduction  in  rates  with  the  possible  ex¬ 
ception  of  telephone  cases.  A  few  instances  may  be  cited: 

Springfield:  The  price  for  gas  in  the  city  of  Springfield  was 
reduced  from  $1.00  net,  for  the  first  10,000  cubic  feet,  to  80  cents  net, 
for  the  first  10,000  cubic  feet. 

Evanston:  The  lighting  rate  was  reduced  from  14.5  cents  per 
kw.  hr.  to  13  cents  per  kw.  hr. 

Jacksonville :  The  price  for  gas  at  Jacksonville  was  reduced 
from  $1.15  net,  for  the  first  1,000  cubic  feet,  to  $1.05  net,  for  the  first 
1,000  cubic  feet.  The  rate  for  electricity  was  reduced  from  13p2 
cents  net,  per  kw.  hr.,  residence  lighting  to  10.8  cents  net,  per  kw.  hr. 

Marseilles :  The  residence  lighting  rate  was  reduced  from  15 
cents  gross,  per  kw.  hr.  to  13  y2  cents  gross,  per  kw.  hr. 

Glencoe:  The  lighting  rate  was  reduced  from  14.5c  per  kw.  hr. 
to  12c  net,  per  kw.  hr. 

Carthage:  The  residence  and  commercial  lighting  rate  was  re¬ 
duced  from  15c  net,  per  kw.  hr.,  to  13l/2c  net,  per  kw.  hr. 

Tuscola:  The  residence  lighting  rate  was  reduced  from  15c  net, 
per  kw.  hr.,  to  13j^c  net,  per  kw.  hr. 

Harvey:  The  lighting  rate  was  reduced  from  14.5c  per  kw.  hr. 
to  12c  net,  per  kw.  hr. 

Kewanee:  The  residence  lighting  rate  was  reduced  from  15c 
net,  per  kw.  hr.,  to  12c  net,  per  kw.  hr. 

Highland  Park:  The  lighting  rate  was  reduced  from  14.5c  per 
kw.  hr.,  to  12c  net,  per  kw.  hr. 

Galesburg :  The  residence  lighting  rate  was  reduced  from  13jdc 
net,  per  kw.  hr.,  to  11c  net,  per  kw.  hr. 

Joliet:  The  lighting  rate  was  reduced  from  14.5c  per  kw.  hr., 

Elmhurst :  The  lighting  rate  was  reduced  from  14.5c  per  kw.  hr., 
to  12c  net,  per  kw.  hr. 

Charleston:  The  rate  for  gas  was  reduced  from  $1.35  net,  per 
1000  cubic  feet,  to  $1.25  net,  per  1000  cubic  feet. 

Kankakee :  The  lighting  rate  was  reduced  from  14.5c  per  kw. 
hr.,  to  12c  net,  per  kw.  hr. 

Aledo:  The  rate  for  electric  lighting  was  reduced  from  15c  per 
kw.  hr.,  subject  to  a  scale  of  discounts,  to  10c  per  kw.  hr.,  net,  for  the 
primary  consumption. 

Lake  Forest:  The  lighting  rate  was  reduced  from  14.5c  per 
kw.  hr.,  to  12c  net,  per  kw.  hr. 

Belleville:  The  electric  lighting  rate  was  reduced  from  11.4c 
net,  per  kw.  hr.,  primary  consumption,  to  10c  net. 

Beardstown:  The  rate  for  gas  was  decreased  from  $1.35  net, 
per  1000  cubic  feet,  to  $1.20  net,  per  1000  cubic  feet. 


36 


LaGrange:  The  lighting  rate  was  reduced  from  14.5c  per  kw. 
hr.,  to  12c  net,  per  kw.  hr. 

LaSalle:  The  rate  for  gas  was  reduced  from  $1.25  net,  per  1000 
cubic  feet,  to  $1.15  net,  per  1000  cubic  feet,  primary  consumption. 

Evanston:  The  uniform  rate  for  gas  of  $1  net,  per  1000  cubic 
feet,  was  reduced  to  $1  net,  for  the  first  1000  cubic  feet;  90c  net,  per 
1000  cubic  feet  in  excess  of  1000  cubic  feet,  up  to  and  including  3000 
cubic  feet;  80c  net,  per  1000  cubic  feet,  for  all  gas  in  excess  of  3000 
cubic  feet. 

Morgan  Park:  The  lighting  rate  was  reduced  from  14.5c  per 
kw.  hr.,  to  12c  net,  per  kw.  hr. 

DeKalb:  The  rate  for  gas  was  reduced  from  $1.25  net,  per 
1000  cubic  feet,  primary  consumption,  to  $1.20  net,  per  1000  cubic 
feet. 

Morris:  The  lighting  rate  was  reduced  from  14.5c  per  kw.  hr., 
to  12c  net,  per  kw.  hr. 

Lake  Forest:  The  rate  for  water  was  reduced  from  25c  net, 
per  1000  gallons,  to  18c  net,  per  1000  gallons. 

Riverside:  The  lighting  rate  was  reduced  from  14.5c  per  kw. 
hr.,  to  12c  net,  per  kw.  hr. 

Galena:  The  rate  for  gas  was  decreased  from  $1.50  net,  per 
1000  cubic  feet,  to  $1.30  net,  per  1000  cubic  feet,  primary  consump¬ 
tion. 

Streator:  The  lighting  rate  was  reduced  from  14.5c  per  kw.  hr., 
to  12c  net,  per  kw.  hr. 

Quincy:  The  rate  for  gas  was  decreased  from  $1.00  to  95c  net, 
per  1000  cubic  feet,  primary  consumption. 

Toluca:  The  lighting  rate  was  reduced  from  14.5c  per  kw.  hr., 
to  12c  net,  per  kw.  hr. 

Lincoln:  The  rate  for  water  at  Lincoln  was  reduced  from  40c 
net,  for  the  first  1000  gallons,  and  30c  for  the  next  2000  gallons,  to 
17c  per  100  cubic  feet  for  the  first  1000  cubic  feet,  which  is  equivalent 
to  2iy2c  per  1000  gallons. 

Waukegan:  The  lighting  rate  was  reduced  from  14.5c  per  kw. 
hr.,  to  12c  net,  per  kw.  hr. 

Zion  City:  The  lighting  rate  was  reduced  from  14.5c  per  kw. 
hr.,  to  12c  net,  per  kw.  hr. 

Savings  by  Reduced  Rates. 

The  following  statement  is  an  estimate  of  the  amount  of  money 
saved  the  patrons  of  public  utilities  in  the  State  of  Illinois  by  reduc¬ 
tions  in  rates,  made  with  the  approval  of  the  Commission.  The  state¬ 
ment  shows  a  total  of  $5,825,000  saved  the  people  during  the  period 
from  January  1,  1914,  to  January  1,  1918.  The  statement  also  shows 
that  during  the  year  1918,  due  to  increases  in  rates,  there  was  a  loss 
in  savings  to  the  people  in  gas  rates,  water  rates  and  heating  rates, 
but  that  there  still  continued  to  be  a  saving  in  electric  lighting  rates. 
In  spite  of  these  increased  rates  for  gas,  water  and  heating,  during 
the  year  1918,  and  the  latter  part  of  1917,  there  still  remains  a  net 
saving  to  the  people  of  the  State  of  $5,871,000  due  'to  rate  decreases 
approved  by  this  Commission  since  January  1,  1914. 


37 


TABULAR  STATEMENT  SHOWING  COMPARATIVE  RATES  AND  SAVINGS 

FOR  UTILITIES  SERVICE,  1914-1919 

Statement  of  Gross  Savings  Effected  as  Compared  with  Rates  of  Jan.  1,  1914. 


Electric 

Rates 

Lighting 

Gas 

Rates 

Water 

Rates 

Heating 

Rates 

Total 

(a)  Savings  up  to  Jan.  1,  1918 

(b)  Additional  to  Jan.  1,  1919 

Total  Jan.  1,  1914,  to  Jan. 
1.  1919 . 

$2,405,000 

1,223,000 

$3,403,000 

-1,061,000 

!  >  li 

$32,000 
-  56,000 

-$15,000 
-  60,000 

$5,825,000 

46,000 

$3,628,000 

$2,342,000 

-$24,000 

-$75,000 

$5,871,000 

The  above  statement  shows  a  saving  up  to  January  1,  1919 

to  these  consumers  of  utility  service  of . $5,871,000 

If  emergency  war  conditions  had  not  arisen,  it  is  estimated 

that  this  saving  would  have  been . $9,657,650 

Note — This  statement  concerns  only  cities  of  over  1,000  population. 

Note— A  minus  sign  indicates  that  rates  were  increased.  The  figures  after 
the  minus  sign  indicate  the  amount  of  rate  increases  during  the  year  of  1918. 


Receipts  (Fees  Under  Sections  p  and  31)  Contrasted  With  Expendi¬ 
tures  from  Appropriations. 

The  operation  of  the  Public  Utilities  act,  which  became  effective 
January  1,  1914,  has  resulted  in  the  payment  of  money  into  the  State 
treasury,  up  to  June  30,  1917,  under  sections  7  anl  31  of  said  act, 
amounting  to  $1,271,398.29.  Expenditures  for  the  same  period,  in¬ 
cluding  salaries  of  Commissioners  and  Secretary,  have  amounted  to 
$1,032,812.86.  The  excess  of  receipts  over  expenditures  for  said 
period  (forty-two  months)  was  $238,585.43. 

Receipts  from  the  same  sources  for  the  entire  period,  from 
January  1,  1914,  to  March  31,  1919,  amount  to  $1,486,719.95.  Ex¬ 
penditures  for  the  same  period,  including  salaries  of  Commissioners  and 
Secretary,  amount  to  $1,550,762.33.  4  he  excess  of  expenditures  over 

receipts  for  said  last  named  period  (sixty-three  months)  is  $64,042.38. 

The  large  volume  of  receipts  has  been  due  to  a  great  extent  to 
the  operation  of  section  31  of  said  act,  providing  for  the  payment  of  a 
fee  for  authority  to  issue  securities  by  public  utilities.  The  amend¬ 
ment  to  this  section,  which  became  effective  July  1,  1917,  providing  that 
fees  for  authority  to  issue  capital  stock  should  be  collected  by  the 
Secretary  of  State,  instead  of  by  the  Commission,  and  providing  further 
that  bond  issues  to  refund  previous  bond  issues  upon  which  fees  had 
been  paid,  authorized  by  the  Commission,  should  not  be  paid  through 
the  commission,  has  had  the  effect  to  greatly  reduce  the  receipts  of  the 
Commission  for  the  period  commencing  July  1,  1917. 

In  addition  to  this  the  taking  over  of  control  of  steam  railroads 
by  the  Eederal  Government  has  further  decreased  the  revenues,  for  the 
reason  that  the  Act  of  Congress  “to  provide  for  the  operation  of  trans¬ 
portation  systems  while  under  federal  control”  specifically  exempts 
steam  railroads  from  the  operation  of  State  laws  relative  to  the  issue 
of  stocks  and  bonds,  thereby  taking  from  the  Commission,  during  the 
period  of  the  war,  to  a  very  large  extent,  control  over  the  issuance  of 
stocks  and  bonds  of  steam  railroads. 

If,  and  when,  the  railroads  shall  be  returned  to  their  owners  for 
private  operation,  the  power  of  the  Commission  to  grant  authorizations 


38 


for  the  issuance  of  stocks  and  bonds  by  steam  railroads  will  be  resumed 
by  the  Commission,  and  the  fees  which  will  then  be  collected,  under 
said  section  31,  upon  original  bond  issues,  will  result  in  greatly  increased 
revenues,  as  compared  with  the  receipts  for  such  purposes  during  the 
period  of  the  war. 

Rate  Increases. 

The  Commission  had  been  in  existence  scarcely  six  months  when 
the  European  war  broke  out.  The  effect  of  the  war  in  its  relation  to 
public  utility  enterprises  was  not  seriously  felt  during  the  first  few 
months,  but  the  constanly  increasing  demands  made  upon  the  resources 
of  this  country  which  grew  out  of  the  struggle  in  the  Old  World,  soon 
began  to  manifest  themselves  in  numerous  ways.  Prices  of  materials 
increased  with  the  consequent  increased  cost  of  maintenance  and  of  new 
constructions.  The  price  of  coal  advanced  and  with  it  the  cost  of 
operation.  The  price  of  the  necessities  of  life  increased  with  corre¬ 
spondingly  increased  cost  of  labor,  and  this  in  turn  vitally  affected  both 
construction  and  operation  costs  of  public  utilities.  After  the  entry 
of  the  United  States  into  the  war  the  scarcity  of  labor  and  increased 
wages  created  most  serious  problems.  The  cost  of  material  and  labor 
made  extensions,  and  in  some  cases  even  necessary  repairs,  impossible, 
and  in  many  instances  the  quality  of  the  service  rendered  was  seriously 
affected.  The  situation  became  so  serious  that  in  some  instances  the 
continued  operation  of  the  utilities  and  the  rendering  of  service  to  the 
public  seemed  impossible,  unless  relief  were  granted  by  increases  in 
rates  or  fares.  A  statement  recently  made  with  reference  to  its  work 
during  the  past  year  by  the  Public  Service  Commission  of  Missouri  is 
peculiarly  applicable  to  the  situation  in  this  State.  That  Commission 
said : 

Prior  to  the  time  when  the  United  States  declared  war  on  Germany,  the 
cost  of  materials  and  labor  had  been  steadily  increasing,  and  after  the 
declaration  of  war  the  cost  of  materials,  labor  and  money  so  quickly  increased 
that  many  of  the  public  utilities  of  the  State  faced  bankruptcy  and  receiver¬ 
ship  with  an  entire  abandonment  or  material  reduction  of  their  service, 
unless  immediate  relief  should  be  granted  in  the  way  of  increased  rates  for 
their  service. 

The  rates  of  the  public  service  companies  having  been  fixed  by  statute, 
franchise  ordinances,  or  Commission  orders,  prior  to  the  war,  so  as  to  allow 
only  pre-war  expenses  and  a  limited  return  on  the  investment,  it  is  apparent 
that  they  could  not  secure  the  necessary  labor,  materials  and  supplies,  with 
which  to  serve  the  public  at  war  prices  without  also  an  increase  of  their 
rates,  and  the  Commission,  realizing  the  necessity  of  service  to  the  public 
by  the  railroads,  express  companies,  street  railroads,  telegraph  and  telephone 
companies,  electric  light,  gas,  water  and  heating  companies  of  the  State,  has 
granted  increased  rates  to  such  utilities  whenever  it  has  appeared  after 
investigation  that  the  same  were  necessary  to  enable  the  utilities  to  serve  the 
public. 

As  a  result  of  the  Commission’s  orders,  the  utilities  in  this  State  have 
been  able  to  grant  living  wages  to  their  employees,  strikes  have  been  avoided 
especially  in  the  large  cities,  and  the  public  has  continued  to  receive  service 
which  was  essential  not  only  to  the  successful  prosecution  of  the  war  but  to 
the  business  comfort  and  convenience  of  the  people. 

Had  not  the  Commission  permitted  the  utilities  to  raise  their  rates  to 
meet  the  increased  cost  of  operation,  there  would  have  been  curtailment  of 
service  and  receiverships  for  utilities  in  many  parts  of  the  State,  with 
receivership  expenses  and  even  higher  rates  to  be  paid  by  the  public,  and  it 


was  much  better  for  the  public  that  the  Commission  should  grant  the 
necessary  increases  in  the  rates. 

On  February  15,  1918,  Secretary  McAdoo  addressed  the  following 
letter  to  the  President : 

I  beg  to  hand  you  herewith  several  memoranda  and  letters  relating  to 
the  street  railway  and  other  local  public  utilities  furnishing  light,  heat  and 
power,  which  I  have  been  asked  to  bring  to  your  attention  by  a  committee 
representing  public-utility  interests. 

These  papers  indicate  the  existence  of  genuine  apprehension  regarding 
the  adequacy  under  present  conditions  of  the  services  and  rates  of  local 
public  utilities.  The  view  is  expressed  that  increased  wages  and  the  high 
cost  of  essential  materials  and  supplies  have  affected  them  as  they  have 
affected  everybody  else,  and  that  united  effort  will  be  necessary  in  order 
to  meet  alike  the  public  requirements  for  service  and  the  corporate  financial 
needs  upon  which  that  service  depends. 

As  Secretary  of  the  Treasury  I  must  take  official  notice  of  those  matters. 
It  is  obvious  that  every  part  of  our  industrial  and  economic  life  should  be 
maintained  at  its  maximum  strength  in  order  that  each  may  contribute  in 
the  fullest  measure  to  the  vigorous  prosecution  of  the  war.  Our  local  public 
utilities  must  not  be  permitted  to  become  weakened.  The  transportation  of 
workers  to  and  from  our  vital  industries  and  the  health  and  comfort  of  our 
citizens  in  their  homes  are  dependent  upon,  and  the  necessary  power  to  drive 
many  of  our  war  industries  and  many  other  industries  essential  to  the  war 
is  produced  by  them. 

It  may  be  that,  here  and  there,  because  of  the  prominence  given  to  less 
important  interests  immediately  at  hand,  State  and  local  authorities  do  not 
always  appreciate  the  close  connection  between  the  soundness  and  efficiency 
o~  these  local  utilities  and  the  national  strength  and  vigor  and  do  not 
resort  with  sufficient  promptness  to  the  call  for  remedial  measures.  In  such 
cases  I  am  confident  that  all  such  state  and  local  authorities  will  respond 
promptly  to  the  national  needs  when  the  matter  is  fairly  and  properly 
brought  before  them. 

Our  public  service  utilities  are  closely  connected  with  and  are  an 
essential  part  of  our  preparations  for  a  successful  prosecution  of  the  war,  and 
the  unfavorable  tendencies  which  the  accompanying  papers  reveal  may  most 
effectively  be  checked,  wherever  may  be  found  to  exist,  and  the  needed  relief 
obtained  only  by  prompt  action  on  the  part  of  the  respective  local  authorities. 

I  earnestly  hope  that  you  may  feel  justified  in  expressing  the  conviction 
that  the  vital  part  which  the  public  utilities  companies  represent  in  the 
life  and  war-making  energy  of  the  nation  ought  to  receive  fair  and  just  rec¬ 
ognition  by  state  and  local  authorities.  Cordially  yours, 

W.  G.  McAdoo. 

To  this  letter  the  President  replied  as  follows : 

1  have  examined  with  care  the  mpmoranda  and  letters  which  you  trans¬ 
mitted  to  me  with  your  letter  of  the  15th.  I  fully  share  the  views  you 
express  regarding  the  importance  of  the  public  service  utilities  as  a  part 
of  our  national  equipment,  especially  in  wartime.  It  is  essential  that  these 
utilities  should  be  maintained  at  their  maximum  efficiency  and  that  every¬ 
thing  reasonably  possible  should  be  done  with  that  end  in  view.  I  hope 
that  state  and  local  authorities,  where  they  have  not  already  done  so,  will, 
when  the  facts  are  properly  laid  before  them,  respond  promptly  to  the 
necessities  of  the  situation. 

I  shall  be  glad  to  have  you  communicate  with  the  local  authorities 
whenever  the  information  in  your  possession  suggests  that  such  a  course 
is  desirable  and  in  the  national  interest.  Cordially  yours, 

Woodrow  Wilson. 

Included  in  the  memoranda  referred  to  by  Mr.  McAdoo  in  his 
letter  above  quoted  is  the  following  extract  from  the  annual  report  of 
the  Comptroller  of  the  Currency,  Hon.  John  Skelton  Williams: 


40 


National  and  state  banks,  and  many  thousands  of  small  and  large 
investors,  have  suffered  seriously  from  the  decline  of  the  earning  capacity 
of  public  utility  corporations  and  the  consequent  shrinkage  in  the  value  of 
their  securities,  representing  investments  of  many  hundred  millions  of 
dollars.  These  losses  naturally  diminish  the  power  and  disposition  of  the 
public  to  respond  to  the  calls  of  the  government  for  money  for  war.  This 
danger  should  arouse,  I  venture  to  suggest,  the  anxiety  and  stimulate  the 
efforts  of  the  Congress  and  of  every  patriotic  citizen.  A  more  urgent  and 
pressing  peril  is  forced  upon  our  attention  by  the  obvious  fact  that  we  are 
dependent  so  largely  on  the  efficiency  and  strength  of  these  corporations  and 
on  our  railroads  for  speed  and  success  in  preparing  for  and  prosecuting 
the  war. 

The  corporations  referred  to  supply  light,  heat,  power  and  electric 
railway  transportation  for  passengers  and  freight.  They  touch  intimately 
the  daily  life  of  the  people.  In  normal  times  they  have  been  favorite 
targets  for  sneers  and  savage  criticisms  from  large  parts  of  the  public  and 
the  press.  In  some  instances,  doubtless,  they  have  deserved  and  invited 
hostility.  In  others,  the  attacks  upon  them  probably  have  been  unjust  and 
unreasonable.  Frequently  they  have  been  victims  or  beneficiaries  of  local 
politics,  suffering  injury  in  the  end  in  either  case.  Yet,  generally,  they  were 
able  to  serve  the  needs  of  their  communities  with  reasonable  efficiency  and  to 
earn  fair  returns  on  the  money  invested  in  them.  Now  they  are  threatened 
with  ruin.  If  they  are  allowed  to  sink  into  inefficiency,  much  of  the  most 
important  war  work  of  the  Government  will  be  crippled  or  paralyzed. 

The  work  of  war  has  thrown  upon  many  of  these  corporations  strains 
which  they  are  unable  to  endure  without  prompt  help.  The  cost  of  their 
labor  and  of  all  material  for  operation,  betterment  and  upkeep  have  increased 
heavily  and  suddenly.  They  are  required  to  increase  radically  and  quickly 
their  service  and  facilities.  Industries  manufacturing  war  munitions  and 
materials  demand  of  the  public  utiltities  corporations  constantly  greater 
supplies  of  power  and  light.  At  the  industrial  centers  car  lines  are  being 
rushed  and  overburdened  by  new  armies  of  workers.  The  gas  companies  are 
called  upon  for  gas  for  cooking  and  heating  in  quantities  beyond  all  normal 
calculations  and  far  beyond  their  present  capacities.  They  are  urged  con¬ 
tinually  to  furnish  more  coke  and  coal  by-products,  toluol,  and  other  elements 
absolutely  essential  in  modern  warfare.  Where  cantonments  have  been 
established,  the  demands  on  the  resources  of  water,  lighting  and  transpor¬ 
tation  companies  are  especially  severe;  ability  to  comply  with  such  demands 
is  necessary  for  the  safety  and  comfort  of  the  fighting  men  in  training. 

A  committee  representing  the  four  leading  associations,  which  include 
all  the  principal  electric  light  and  power  companies,  street  railway  compa¬ 
nies  and  the  most  important  gas  companies  of  the  country,  recently  submitted 
to  this  office  a  report  in  which  attention  was  asked  to  the  increase  within  the 
last  two  years  in  the  cost  of  materials  they  must  use  for  maintenance  of  their 
properties.  They  gave  a  list  of  percentages  of  additional  cost,  showing  among 
others  the  following  items: 


INCREASES  FROM  1915  TO  1917 


Per 

Cent 


Copper  Wire . 180 

Pipe,  cast-iron . 100 

Axles  . 272 

Acids  . 162 

Brass  . 300 

Car  forging’s . 216 


Per 

Cent 


Castings,  malleable . 198 

Copper,  bar  and  sheet . 147 

Lead,  pig  and  sheet . 127 

Nails  . 110 

Steel,  tool . 400 

Tie-plates  . 276 


The  continued  and  increasing  efficiency  of  these  corporations  is  im¬ 
portant  for  the  successful  conduct  of  the  war.  This  efficiency  is  not  possible 
with  present  conditions.  Corporations  proved  by  their  own  figures  to  be 
approaching  bankruptcy  cannot  obtain  money  for  improvements  or  main¬ 
tenance.  On  the  other  hand,  banks  and  citizens  suffering  severe  losses  from 
investments  in  the  securities  of  these  entirely  legitimate  and  once  promising 
enterprises  will  be  discouraged  from  lending  money  to  the  Government  or 
deprived  of  the  means  to  lend. 


41 


The  first  and  most  direct  relief  to  the  public  utilities  corporations  can 
be  given  by  the  State  Public  Utilities  Commissions  and  municipal  and  local 
authorities,  with  the  broad-minded  co-operation  of  the  people  generally,  un¬ 
derstanding  the  necessities  of  war  and  realizing  that  the  more  promptly 
its  burdens  are  accepted  the  sooner  they  will  be  lifted.  It  is  essential  that 
forbearance  and  consideration  be  exercised  by  the  State  Commission  and 
municipal  authorities  and  that  the  corporations  also  be  permitted  to  make 
such  additions  to  their  charges  for  service  as  will  keep  in  them  the  breath  of 
solvency,  protect  their  owners  against  unjust  loss  and  give  them  a  basis  of 
credit  on  which  they  may  obtain  the  funds  with  which  to  meet  the  strain 
put  on  them  by  the  government’s  needs.  The  breaking  down  of  these  cor¬ 
porations  would  be  a  national  calamity. 

Because  of  the  gravity  of  the  situation  in  this  regard,  1  am  moved  to  ask 
for  it  the  careful  attention  of  the  Congress  and  the  public.  I  am  impressed 
with  the  importance  of  early  consideration  by  the  Congress  of  some  measure 
to  provide  directly  or  indirectly  for  advance  of  funds  on  some  conservative 
basis  to  such  of  these  corporations  as  need  help  most  urgently,  so  that  they 
can  give  adequate  service  to  the  Government.  The  remedy  would  be  unusual; 
but  the  times  are  unusual. 

The  situation  was  so  serious  that  efforts  were  made  by  the  public 
utility  corporations  to  induce  the  government  to  take  over  the  operation 
and  control  of  public  utilities,  particularly  street  railway  lines,  for  the 
purpose,  among  others,  of  prescribing  rates  for  service,  as  well  as 
wages  of  employees,  during  the  period  of  the  war,  to  save  them  from 
general  disaster  and  to  preserve  for  the  public  the  service  to  which  it 
was  entitled.  This  the  government  did  not  do.  It  did,  however, 
appoint  a  War  Labor  Board,  which  was  created  to  devise  for  the  period 
of  the  war  a  method  of  labor  adjustment. 

Street  Railway  Situation. 

For  many  years  the  almost  universal  rate  of  fare  for  street  car 
service  has  been  five  cents.  In  the  city  of  Cleveland,  Ohio,  the  rate  of 
three  cents  had  been  established  on  the  municipal  lines.  In  some 
instances  there  was  a  ticket  fare  of  less  than  five  cents.  In  a  few 
cases  six-cent  fares  were  charged. 

During  the  past  year  radical  changes  have  taken  place.  By  Feb¬ 
ruary,  1919,  out  of  a  total  of  two  hundred  and  seventy-seven  cities  in 
the  United  States  with  a  population  of  25,000  or  more,  one  hundred  and 
seventy-six  were  paying  increases  in  street  railway  fares,  and  in  fifty- 
three  others  advance  fares  are  pending. 

Of  the  cities  in  which  increased  fares  have  been  established,  there 
are  twenty-seven  in  which  a  ten-cent  fare  is  being  collected ;  eighteen 
in  which  an  eight-cent  fare  is  being  collected;  and  fifty-seven  in  which 
a  seven-cent  fare  is  being  collected ;  a  number  in  which  a  six-cent  fare 
is  being  collected,  and  a  number  of  others  in  which  reduced  ticket  fares 
only  have  been  abolished. 

Altogether  there  are  at  this  time  three  hundred  and  twenty-nine 
cities  in  the  United  States  paying  increased  street  car  fares. 

In  the  city  of  Cleveland,  the  city  of  3-cent  car  fares,  the  National 
War  Labor  Board  granted  an  increase  in  wage  rates  to  street  car 
employees,  which  amounted  to  $1,500,000  a  year.  On  the  morning  fol¬ 
lowing  the  notice  of  this  award,  and  without  giving  any  notice,  there 
was  placed  in  effect  a  straight  five-cent  fare,  with  a  charge  of  one  cent 
for  transfers. 


42 


A  large  number  of  cases  affecting  particularly  the  wage  scale  of 
important  electric  railway  systems  throughout  the  country  was  handled 
by  the  War  Labor  Board.  In  many  of  these  cases  the  increase  in  the 
wages  authorized  by  the  awards  of  the  War  Labor  Board  was  un¬ 
precedented,  ranging  from  approximately  thirty  per  cent  to  two  hun¬ 
dred  per  cent.  A  few  illustrations  may  be  given  affecting  cities  in 
Illinois. 

East  St.  Louis  &  Alton:  The  trainmen  received  increased  wages, 
June  1,  1917,  of  four  cents  per  hour,  as  a  result  of  an  award  of  an 
arbitration  board.  On  March  1,  1918,  by  agreement,  working  condi¬ 
tions  were  changed  without  changing  the  wage  scale.  On  June  1, 
1918,  the  wages  of  trainmen  were  advanced  two  cents  per  hour,  which 
was  not  acceptable  to  the  men.  This  resulted  in  the  matter  being 
referred  to  said  National  War  Labor  Board,  which,  on  August  1,  1918, 
promulgated  an  award  to  be  retroactive  to  June  1,  1918,  giving  trainmen 
an  increase  of  14  cents  per  hour  and  shopmen  an  increase  of  36.36 
cents  per  hour. 

In  the  case  of  the  Aurora ,  Elgin  &  Chicago  Railroad,  the  wages 
of  trainmen  advanced  from  an  average  of  28.6  cents  in  December, 
1915,  to  42.1  cents  in  December,  1918,  as  a  result  of  arbitration  and 
agreement. 

In  the  case  of  the  Chicago  <E  Interurban  Traction  Company,  the 
wages  of  trainmen  were  advanced  from  a  scale  ranging  between  thirty 
and  thirty-nine  cents  per  hour  in  December,  1917,  to  a  scale  ranging 
between  forty-three  and  forty-eight  cents  per  hour,  as  a  result  of  an 
award  by  the  National  War  Labor  Board. 

In  the  case  of  the  Chicago  Surface  Lines,  on  June  1,  1915,  an 
arbitration  board  awarded  an  increase  of  wages  from  a  scale  ranging 
from  twenty-three  to  thirty-two  cents  to  a  scale  of  from  twenty-six  to 
thirty-five  cents,  and  a  further  increase,  on  June  1,  1917,  raised  this 
scale  to  range  from  thirty  to  thirty-nine  cents.  Action  of  the  War 
Labor  Board,  on  August  1,  1918,  increased  the  scale  to  range  from 
forty-three  to  forty-eight  cents. 

In  the  case  of  the  Street  Railzvay  System  in  Galesburg,  the  average 
wage  of  trainmen  was  increased  from  twenty-four  cents  in  December, 
1915,  to  forty-two  cents  in  December,  1918,  the  latter  being  fixed  by 
award  of  said  National  War  Labor  Board. 

In  the  case  of  the  Chicago  Elevated  Lines,  the  wages  paid  trainmen 
increased  from  an  average  of  twenty-nine  cents  in  December,  1915,  to 
44.7  cents  in  December,  1918,  the  latter  figure  being  an  award  of  said 
National  War  Labor  Board. 

In  connection  with  increases  in  street  car  fares,  Mr.  Taft,  Chair¬ 
man  of  the  National  War  Labor  Board,  in  a  letter  directed  to  the 
Railroad  Commission  of  South  Carolina,  and  referring  to  the  situation 
at  Charleston,  states  that  according  to  figures  compiled  by  the  Federal 
Government,  a  five-cent  fare  in  1915  was  about  the  equivalent  of  a 
seven-cent  fare  in  1918,  and  furthermore  calls  attention  to  the  fact  that 
if  the  public  expects  to  retain  street  railway  service,  in  view  of  the 
large  increased  cost  of  operation,  it  must  pay  a  larger  amount  for  the 
service. 


43 


In  connection  with  the  foregoing,  the  attention  of  the  committee  is 
directed  to  a  recommendation  by  the  National  War  Labor  Board,  over 
the  signatures  of  Ex-President  William  H.  Taft  and  Frank  P.  Walsh, 
of  Kansas  City,  joint  chairmen  of  said  board,  which  speaks  for  itself, 
and  is  as  follows : 

We  have  recommended  to  the  President  that  special  Congressional 
legislation  be  enacted  to  enable  some  executive  agency  of  the  Federal  Gov¬ 
ernment  to  consider  the  very  perilous  financial  condition  of  this  and  other 
electric  street  railways  of  the  country,  and  raise  fares  in  each  case  in  which 
the  circumstances  require  it.  We  believe  it  to  be  a  war  necessity  justifying 
federal  interference.  Should  this  be  deemed  unwise,  however,  we  urge  upon 
the  local  authorities  and  the  people  of  the  locality  the  pressing  need  for  such 
an  increase  adequate  to  meet  the  added  cost  of  operation. 

This  is  not  a  question  turning  on  the  history  of  the  relations  between 
the  local  street  railways  and  the  municipalities  in  which  they  operate.  The 
just  claim  for  an  increase  in  fares  does  not  rest  upon  any  right  to  a  dividend 
upon  capital  long  invested  in  the  enterprise.  The  increase  in  fare  must  be 
given  because  of  the  immediate  pressure  for  money  receipts  now  to  keep 
the  street  railways  running  so  that  they  may  meet  the  local  and  national 
demand  for  their  service.  Over-capitalization,  corrupt  methods,  exorbitant 
dividends  in  the  past,  are  not  relevant  to  the  question  of  policy  in  the  present 
exigency.  In  justice,  the  public  should  pay  an  adequate  war  compensation 
for  a  service  which  cannot  be  rendered  except  for  war  prices..  The  credit  of 
these  companies  in  floating  bonds  is  gone.  The  ability  to  borrow  on  short 
notes  is  most  limited.  In  the  face  of  added  expenses  which  this  and  other 
awards  of  needed  and  fair  compensation  to  their  employees  will  involve,  such 
credit  will  completely  disappear.  Bankruptcy,  receiverships  and  demorali¬ 
zation,  with  failure  of  service,  must  be  the  result.  Hence  our  urgent  recom¬ 
mendation  on  this  head.  Willi  am  H.  Taft, 

Attest:  Frank  P.  Walsh, 

W.  Jett  Lauck,  Arbitrators. 

Secretary  National  War  Labor  Board. 

July  31,  1918. 

In  sustaining  a  mandamus  action  against  the  Indiana  Commission, 
directing  it  to  consider  the  street  railway  situation  in  Indianapolis  under 
the  emergency  clause  of  the  Indiana  law,  the  Supreme  Court  of  Indiana 
said : 

Every  sane  person  has  long  since  realized  the  critical  and  abnormal 
condition  of  the  country  in  every  avenue  of  business.  A  living  wage  three 
years  ago  is  a  starvation  wage  of  today.  The  cost  of  all  commodities,  regard¬ 
less  of  kind  or  class,  has  increased  until  there  is  not  now  a  semblance  of 
normal  prices.  If  relator  was  receiving  only  a  fair  and  reasonable  rate  of 
fare  five  years  ago,  under  present  conditions  we  know  from  common  knowl¬ 
edge,  it  cannot  long  continue  to  furnish  reasonable  service  at  the  old  rate. 
That  is  a  matter  for  the  Commission  and  the  Legislature  has  wisely  made 
provision  whereby  existing  conditions  may  be  met  and  handled  to  the 
reasonable  protection  of  all  concerned. 

Commenting  upon  the  reasonableness  of  increases  in  street  railway 
fares,  the  New  Jersey  Court  of  Errors  and  Appeals  recently  said: 

Assuming  that  the  rate  of  five  cents  existing  prior  to  the  new  conditions 
was  a  reasonable  one,  the  application  of  ordinary  common  sense  will  unhes¬ 
itatingly  lead  every  fair-minded  person  to  the  conclusion  that  it  would  not 
continue  to  remain  reasonable  if  the  cost  of  production  so  advances  as  to 
destroy  the  basis  upon  which  it  was  rested.  The  solution  of  such  a  proposi¬ 
tion  does  not  require  the  aid  of  legal  learning.  It  is  a  question  of  economics 
which  any  one  of  ordinary  intelligence  can  apply. 

As  a  result  of  these  increases  in  the  costs  of  labor  and  material 
which  threatened  the  ability  of  the  various  street  railway  companies  to 


44 


continue  operation,  the  Illinois  Commission  was  appealed  to  for  in¬ 
creases  in  rates,  and,  as  a  result  of  its  hearings,  granted  temporary  in¬ 
creases  in  a  large  number  of  cases. 

Emergency  Rate  Orders — Utilities  Generally. 

The  same  general  conditions  applied  also  to  utilities  other  than 
street  railways.  In  considering  these  emergency  cases  the  circum¬ 
stances  were  such  that  the  proceedings  and  the  methods  usually  em¬ 
ployed  in  rate  cases  considered  during  normal  times  could  not  reason¬ 
ably  be  made  to  apply.  Such  procedure  heretofore  had  involved  the 
preparation  of  detailed  valuations  and  extensive  accounting  and  sta¬ 
tistical  studies  of  the  property  involved.  The  new  conditions,  however, 
were  so  serious  that  those  detailed  studies  were  no  longer  possible,  if 
conditions  were  to  be  met  with  the  promptness  which  they  demanded. 
In  fact,  in  numerous  instances,  it  was  not  necessary  to  consider  the 
question  of  valuation  at  all,  for  the  reason  that  the  increased  costs  of 
operation  were  so  great  as  practically  to  wipe  out  net  operating  reve¬ 
nues.  Little  or  nothing  was  left  for  any  return  on  investment.  Under 
such  circumstances,  a  valuation  would  not  only  prove  unnecessary  to 
determine  an  emergency  rate,  but  the  delay  incident  to  the  making  of 
a  detailed  valuation  would  result  in  irreparable  loss  and  injury  to  the 
utility  and  a  crippling  of  the  service  which  the  public  required.  Faced 
with  this  situation,  the  Commission  modified  its  methods  of  investi¬ 
gation  and  procedure  in  such  a  way  as  to  meet  the  abnormal  conditions, 
as  it  believed,  with  fairness  and  justice  to  all  parties.  Confronted  with 
these  same  conditions,  commissions  throughout  the  country  generally 
took  this  same  view  of  the  situation. 

The  Idaho  Commission,  in  discussing  the  question  of  valuation  in 
a  recent  case,  said : 

The  Commission  does  not  deem  it  necessary  in  the  determination  of  the 
questions  involved  in  this  case  to  attempt  to  establish  a  valuation  basis  for 
rates  at  this  time,  but  will  deal  with  the  question  of  increased  rates  as  pro¬ 
posed  in  said  schedule  as  an  emergency  occasioned  by  war  conditions,  and 
will  grant  such  temporary  relief  as  the  testimony  and  exhibits  and  an 
examination  of  the  company’s  operating  revenues  and  operating  expenses 
seem  to  justify. 

In  the  case  of  the  Empire  Gas  and  Electric  Company,  the  New 
York  Commission,  Second  District,  granted  temporary  increases  on 
account  of  the  emergency  produced  by  war,  and  said : 

As  theoretical  rates,  they  are  not  satisfactory  to  the  Commission,  but 
all  concerned  are  confronted  by  a  very  practical  and  very  serious  condition 
which  requires  for  the  moment  the  discarding  of  theories  as  to  scientific  rate 
making.  All  parties  to  the  controversy  are  to  be  congratulated  and  com¬ 
mended  for  taking  such  action  as  will  enable  the  Commission  to  fix  emergency 
rates  without  a  prolonged  investigation  involving  perhaps  a  valuation  of  the 
company’s  properties  in  each  community,  and  which  would  be  conducted  at  a 
time  when  costs  are  shifting  so  rapidly  that,  whatever  time  might  be  taken 
as  the  basis  of  calculation,  the  situation  would  probably  be  materially  changed 
while  the  investigation  was  in  progress. 

The  New  Jersey  Board  of  Public  Utilities  Commissioners  defines 
an  emergency  as  follows : 

An  emergency  for  which  a  carrier  is  entitled  to  relief  by  a  temporary 
rate  exists  where,  by  reason  of  general  conditions  not  affecting  the  applicant 


45 


utility  alone,  the  operating  revenues  are  insufficient  to  operate  and  maintain 
its  property  and  to  pay  rentals  and  interest  on  such  of  its  securities,  a  default 
in  the  payment  of  which  would  jeopardize  the  solvency  of  the  company. 

In  granting  emergency  relief  for  gas  furnished  in  the  city  of 
Sedalia,  the  Missouri  Public  Service  Commission  said : 

However,  as  much  as  the  Commission  desires  to  have  before  it  the 
complete  inventory  and  appraisement  of  a  public  utility  before  reaching  a 
conclusion  as  to  a  reasonable  rate  to  cover  the  service  rendered,  it  has 
found  it  wholly  impractical  in  many  instances  during  these  extraordinary 
times  in  the  world’s  history  to  demand  it  as  a  condition  precedent.  The 
Commission  is  not  unmindful  of  the  fact,  with  labor  and  fuel  prices  ascending 
skyward  by  leaps  and  bounds,  that  during  the  interim  of  time  that  the  expert 
doctors  are  making  a  diagnosis  of  the  case  by  a  long,  laborious  inventory  and 
appraisal  of  the  public-serving  utilities  of  our  State,  the  patient  would  very 
likely  succumb,  and  the  resultant  thereof  be  that  the  public  would  be  without 
service. 

*  *  *  Unless  it  can  grant  prompt  emergency  relief  to  utilities 

suffering  because  of  abnormal  conditions,  for  which  they  are  not  responsible, 
as  well  as  reduce  their  rate  of  charge  in  behalf  of  the  using  public  when  the 
facts  warrant  such  action,  then  a  regulatory  commission  serves  no  useful 
purpose  in  our  form  of  government.  Upon  this  theory  our  Commission  has 
been  equal  to  the  underlying  duties  for  which  it  was  created,  and  has  fear¬ 
lessly,  yet  painstakingly,  granted  the  emergency  relief  to  the  public  service 
utilities  of  our  State.  *  *  *  This  character  of  financial  relief  has  been 

granted  of  a  temporary  nature  only,  the  Commission  reserving  unto  itself  full, 
continuing  jurisdiction  in  the  premises;  and  it  is  upon  this  basis  that  relief 
will  be  granted  to  the  applicant. 

In  a  case  where  the  New  Jersey  Commission  had  increased  street 
railway  fares  without  having  made  a  valuation,  the  New  Jersey  Court 
of  Errors  and  Appeals  in  a  recent  decision  (O’Brien  v.  Board  of 
Public  Utilities  Commissioners),  said  on  the  question  of  the  necessity 
of  a  valuation  as  a  basis  for  rate  making  in  an  emergency  case : 

We  are  of  the  opinion  that  under  the  facts  shown  in  this  case,  a  valua¬ 
tion  is  not  required  by  law;  that  that  board  exercised  a  reasonable  discre¬ 
tion  within  the  legislative  power  delegated  to  it,  and  that  no  more  is  exacted 
from  the  public  than  the  services  rendered  are  reasonably  worth  to  it  if  they 
are  to  be  efficiently  served  or  perhaps  served  at  all. 

The  following  table  shows  the  number  of  applications  to  the 
Public  Utilities  Commission  of  Illinois,  for  emergency  rate  increases 
by  electric,  gas,  heating  and  water  utilities,  respectvely.  It  also  shows 
the  number  of  such  applications  approved,  the  number  disapproved, 
and  the  number  still  pending  on  January  1,  1919  : 


To  January  1,  1919. 

Filed. 

Approved. 

Disapproved. 

Pending. 

Electric  . 

138 

112 

6 

20 

Gas  . 

72 

62 

3 

7 

Heating  . 

29 

19 

4 

6 

Water  . 

34 

17 

2 

15 

Total  . 

273 

219 

15 

48 

A  paragraph  appearing  in  many  of  the  Commission’s  orders 
relative  to  rate  increases  states  the  position  of  the  Commission  as 
follows : 

Government  officers,  having  in  mind  the  prosecution  of  the  war,  have 
expressed  concern  lest  the  public  utilities  of  the  country,  through  increased 


46 


operating  expenses  without  corresponding  increases  of  revenue,  might  be 
unable  to  maintain  their  service  to  a  standard  which  is  essential  for  the 
successful  prosecution  of  the  war.  The  Commission  cannot  overlook  the 
fact  that  the  expenses  which  have  been  incurred  have  been  very  material  in 
amount,  and  that  in  many  cases  the  need  for  relief  in  the  way  of  increases  of 
rates  to  meet  the  increased  expenses  of  operation  is  very  vital. 

All  of  the  emergency  orders  entered  by  the  Illinois  Commission 
provide  for  temporary  increases  only.  In  most  cases  the  advanced  rates 
have  been  made  effective  for  a  short  definite  period  or  for  a  period  not 
to  exceed  six  months  or  a  year  after  the  termination  of  the  war,  as 
declared  by  the  President  of  the  United  States,  unless  otherwise 
ordered  by  the  Commission,  and  in  each  such  instance,  at  the  termina¬ 
tion  of  this  temporary  period,  the  rates  automatically  revert  to  the 
rates  in  effect  previous  to  the  entry  of  the  emergency  order,  unless 
otherwise  ordered  by  the  Commission.  In  this  way  it  will  be  seen 
that  the  burden  is  put  upon  the  utility  to  show  cause  why  the  pre-war 
rates  should  not  be  restored  at  the  close  of  the  war  period. 

And  so  it  happens  that  in  a  majority  of  the  rate  cases  determined 
by  the  Commission  during  the  past  year  increased  emergency  or  tem¬ 
porary  rates  have  been  granted,  and  there  is  reason  to  believe  that 
much  of  the  present  opposition  to  the  operation  of  the  law  and  its 
administration  by  the  Commission,  and  the  clamor  for  its  repeal  or 
amendment,  is  due  at  this  time  to  these  war-time  rates. 

The  following  table  shows  recent  rate  movements  in  Illinois  by 
comparing  the  rates  for  various  classes  of  utility  service  for  various 
years,  the  rates  for  the  year  1918  with  the  year  1914,  and  for  the  year 
1919  with  the  year  1914,  and  for  the  year  1919  with  the  year  1918: 


* 


TABULAR  STATEMENT  SHOWING  COMPARISON  OF  RATES  FOR  UTILITY  SERVICE 
As  of  Jan.  1,  1914,  1918,  and  1919,  in  cities  of  over  1,000  population. 


47 


Total. 

Per¬ 

cent. 

C*  ^  ^ 

co  — -  <m 

Tt<  »0 

100.0 

40.5 

31.4 

28.1 

100.0 

45,0 

1.3 

53.7 

O 

© 

o 

r— < 

Num¬ 

ber. 

>o  (M  tO> 

co  co  eft 

CM  <M 

562 

227 

176 

158 

561 

253 

7 

302 

<M 

o 

to 

Heating- 

Service. 

Per¬ 

cent. 

O  tO  CO 

CM  00  00 

CM  CO 

100.0 

70.6 

8.8 

20.6 

100.0 

52.9 

~H 

c- 

rr 

100.0 

Num¬ 

ber. 

00  CO  Tf1 

CM 

UO  -rf  CO  t" 

CO  <M 

34 

18 

CD 

34 

Water 

Service. 

Per¬ 

cent. 

05  CO 

rH  t-H  CO 
h  QO 

100.0 

30.8 

11.5 

57.7 

100.0 

30.8 

3.9 

65.3 

o 

o 

o 

▼-H 

Num¬ 

ber. 

HCOO 

nt 

<M  CO  CO  O 

LO  — <  CO 

(M  CO  (M  '’f 

tO  — *  CO 

o> 

to 

Gas 

Service, 

_ 

Per¬ 

cent. 

00  tO 

O  CO  O 

»o 

o  «wo 

O  <M  05  GO 

O  00  (M  CO 

g’ffi 

0  001 

67.7 

o 

o 

o 

Num¬ 

ber. 

co  co 
-O’- 
**h 

CO  o>  lO  CD 

(M  t-  CO  GO 

w 

CO  M 

CM  i- 

<M 

O 

CO 

w 

CM 

Electric 

Lighting 

Service. 

Per¬ 

cent. 

woco 

lOO^t 

lO 

100.0 

45.7 
40.5 

13.8 

100.0 

58. 1 
2.0 
39.9 

100.0 

Num¬ 

ber. 

CO  CO  CO 
—  CM  — 

<M  rO  0>  i.O 

i-O  —  o  CO 

*M  - 

(M  »0  —  *  CO 

>C  -f  o  1  tO 

n  ^  -  j  '?! 

i 

l 


C/5  <Z>  CO 
<D  V  V 

o3  cj  ci 

u  ^  u 

CO  CO  00 
05  05  05 


O  O  V 

•pH  *rH  *r-< 

£  £ 

C  C  d 

**-<  «r— (  •■— ' 

C/5  C/5  or: 
0  0)0 

’■*->  w 

'666 


ri 

E C  ^ 

rj  os  — 

1h  05 


X  d 

05  5 
—  rC 
+-» 
d 

03  cc 

cn 


dS 


D 


43.-d 
H  03  43 

CO  E/3  ED 
03  03  03 
+J+J-IJ 

d  oj  ra 

^-i  J-i  J-i 
05  05  05 
05  05  05 

dl,d,d 
o  o  o 

•pH  -r- <  'H 

.d,d,d 

£  is  £ 

d  d  d 

"pH  »r— <  *r— 1 

c/3  e»  a: 

01  0>  0) 


OOQ 


GO 
0)  CO 
0) 


CO  u 

Pj£o5 

n  d~ 

E30  3  CO 

-  2  d 

—  w  O 
'CS  35  £ 

O  ^  S 

o>  4>  p 

o  >h  j-j 

W  43  03 


33  93  33 
0)  0)  0) 
4->  4_J  4-) 

d  rj  d 
>-i  s-t  ^ 
C.'  Q  Ci 
C>OiO 

T-H  ^  — * 

ddd 

O  O  o 

*rH  -r-< 


2  £3  Cl 

•pH  *rH  *pH 

05  CO  C/5 
0)0  0 


ooo 


48 


Ordinance  Rates. 

There  would  seem  to  be  no  question  as  to  the  power  of  the  Com¬ 
mission  to  regulate  the  rates  and  service  of  public  utilities  regardless 
of  existing  franchise  ordinances  which  make  specific  provision  for 
rates  and  service.  The  courts  generally  have  held  that  Commissions 
operating  under  laws  similar  to  the  Illinois  Public  Utilities  Law 
possess  spch  power.  ( Chicago  &  Southern  Trac.  Co.  v.  Illinois  Cen¬ 
tral  R.  R.  Co.,  246  Ill.,  146  ;  State  Public  Utilities  Commission,  ex 
rel.  Harley  B.  Mitchell,  et  al.,  v.  Chicago  &  West  Towns  Ry.  Co.,  et 
al.,  245  Ill.,  555;  City  of  Chicago,  et  al.  v.  Wm.  L.  O’Connell,  et  al., 
248  Ill.,  591  ;  Charles  A.  Hite  v.  C.  I.  &  W .  R.  R.  Co.,  et  al.,  284  Ill., 
291 ;  Milwaukee  Electric  Railway  &  Light  Co.  v.  Railroad  Commis¬ 
sion  of  Wisconsin,  153  Wis.,  592,  238  U.  S.  174;  Wyandotte  County 
Cas  Co.  v.  Kansas ,  ex  rel.,  88  Kans.,  165,  231  U.  S.,  622;  City  of  St. 
Louis  v.  Public  Service  Commission  of  Missouri  and  United  Rail¬ 
ways  Company  of  St.  Louis  (not  yet  reported)  ;  Winfield  et  al.  v. 
Public  Service  Commission  of  Indiana  et  al.,  118  N.  E.,  531,  P.  U.R. 
1918B,  141  ;  Traverse  City  v.  Michigan  Railroad  Commission  et  al., 
168  N.  W.,  481,  P.  U.  R.,  1918F,  152;  City  of  Pawhuska  v.  Pawhuska 
Oil  &  Gas  Co.,  P.  U.  R.,  1917F,  226;  State  of  Montana,  ex  rel.,  City 
of  Billings  v.  Billings  Gas  Co.,  113  Pac.,  199,  P.  U.  R.,  1918F,  768; 
Sand  Point  Water  &  Light  Co.,  Ltd.,  v.  City  of  Sandpoint,  173  Pac., 
972,  P.  XI.  R.,  1918F,  737  ;  City  of  Portland  v.  Public  Service  Com¬ 
mission  of  Oregon  et  al,  173  Pac.,  1118,  P.  U.  R.,  1919A,  127;  State 
ex  rel.  Webster  v.  Superior  Court,  61  Wash.,  37;  City  of  Pall  River 
et  al  v.  Public  Service  Commission  et  al.,  117  N.  E.,  915,  P.  U.  R., 
1918B,  141;  Burrough  of  North  Wildwood  et  al.  v.  Board  of  Public 
Utility  Commissioners  et  al.,  95  AtL,  749,  P.  U.  R.,  1916B,  77;  Ben- 
wood  v.  Public  Service  Commission,  15  W.  Y a.,  127). 

As  to  whether,  when,  and  under  what  circumstances  and  condi¬ 
tions,  a  franchise  ordinance  may  constitute  an  inviolable  contract,  pro¬ 
tected  by  the  Constitution  of  the  State  of  Illinois  and  the  Constitution 
of  the  United  States,  as  between  a  municipality  and  the  utility  given 
the  franchise,  the  attention  of  the  Committee  is  directed  to  the  follow¬ 
ing  cited  authorities  and  quotations  from  the  opinion  of  the  court  in 
each  of  the  cases  referred  to: 

In  the  City  of  Danville  v.  Danville  Water  Company,  178  Ill.,  299, 
the  water  company  sued  the  city  to  recover  the  sum  of  $2,620.62, 
which  it  claimed  the  city  owed  for  water  consumed  according  to  the 
terms  of  an  ordinance  under  which  the  Water  Company  constructed 
its  plant  and  furnished  water  to  the  city.  The  city  admitted  liability 
for  $1 ,930.00,  but  denied  liability  for  the  remainder  on  the  ground 
that  by  the  terms  of  certain  ordinances  passed  by  the  city  subsequent 
to  the  original  ordinance  under  which  the  Water  Company  began 
operations,  the  rates  which  the  city  was  bound  to  pay  as  rentals  for 
water  hydrants  had  been  reduced. 

It  appeared  that  on  November  9,  1882,  the  city  council  of  Dan¬ 
ville  passed  an  ordinance,  granting  the  Water  Company  the  right  of 
constructing  and  maintaining  waterworks,  and  of  using  the  streets 
of  the  city  for  that  purpose  for  the  term  of  thirty  years.  By  the 
same  ordinance  the  city  rented  from  the  Water  Company,  and  agreed 


49 


to  pay  for  one  hundred  fire  hydrants  for  the  term  of  thirty  years, 
at  the  rate  of  $75  each  per  year.  It  was  further  provided  that  hy¬ 
drants  in  excess  of  one  hundred  should  be  at  the  rate  of  $62.50  each 
per  annum,  for  the  next  forty  hydrants,  and  for  all  in  excess  of  one 
hundred  and  forty,  the  rate  should  be  $50  each  per  annum,  for  the 
balance  of  thirty  years. 

On  January  17,  1895,  the  city  council  of  Danville  passed  an 
ordinance  reciting  that  the  rates  theretofore  charged  as  hydrant  rental 
were  excessive,  and  that  from  and  after  May  1,  1895,  the  rate  for 
the  first  one  hundred  and  forty  hydrants  should  be  $50  each,  and  pro¬ 
portionately  lower  rates  should  be  charged  for  additional  hydrants. 
This  ordinance  was  approved  and  a  certified  copy  thereof  was  served 
on  the  Water  Company  within  five  days  thereafter. 

The  city  contended  that  the  rates  fixed  in  the  last  mentioned 
ordinance  were  just  and  reasonable  and  that  its  indebtedness  to  the 
Water  Company  should  be  computed  upon  the  basis  of  the  rates  pre¬ 
scribed  in  said  ordinance. 

The  Water  Company  contended  that*  the  ordinance  of  November 
9,  1882,  fixing  the  higher  rates  for  a  period  of  thirty  years,  having 
been  accepted  and  acted  upon  by  the  Water  Company,  constituted  a 
valid  contract  between  it  and  the  City  of  Danville ;  that  the  subsequent 
ordinance  of  January  17,  1895,  which  provided  for  a  substantial  re¬ 
duction  in  water  rates,  was  unconstitutional  and  void. 

The  Circuit  Court  adopted  the  view  of  the  water  company  and 
rendered  judgment  in  its  favor  for  the  full  amount  claimed. 

On  appeal  the  Supreme  Court  reversed  the  judgment  and  re¬ 
manded  the  case. 

The  Illinois  Supreme  Court  decided  that  the  city  had  no  power  to 
make  a  contract  to  pay  fixed  and  unalterable  rates  for  thirty  years ;  that 
under  the  authority  conferred  upon  it  by  the  legislature  “to  contract  for 
a  supply  of  water  for  public  use  for  a  period  not  exceeding  thirty 
years,”  the  city  could  enter  into  an  agreement  with  the  water  company 
whereby  “the  supply  could  be  made  for  the  entire  term,  but  the  price 
is  to  be  determined  from  time  to  time,  and  the  rates  to  be  settled  by  the 
rules  of  the  common  law.” 

The  Court  held  further  that  by  virtue  of  the  legislative  power 
conferred  upon  the  city  of  Danville,  “There  was  to  be  reserved  to  the 
city  council  the  power  to  fix  the  rates  by  ordinance  at  such  figures  as 
should  be  fair  and  reasonable.  If  the  rates  were  to  be  fixed  by  ordi¬ 
nance,  they  could  only  be  fixed  by  such  ordinance  as  was  legal  and 
whose  passage  was  within  the  power  of  the  council.  A  legislative 
body  can  not  part  with  its  powers  by  any  proceeding  so  as  not  to  be 
able  to  continue  the  exercise  of  such  powers.  It  has  no  authority  even 
by  contract  to  control  and  embarrass  its  legislative  powers  and  duties. 
(Greenwood  on  Public  Policy,  p.  317;  Cooley’s  Const.  Lim.,  p.  206;  15 
Am.  and  Eng.  Ency.  of  Law,  p.  1045  ;  1  Dillon  on  Mun.  Corp.,  Sec. 
443).  What  might  be  proper  for  a  ciy  this  year  might  not  be  proper 
the  next  year.  It  is  impossible  to  determine  with  absolute  or  even 
tolerable  certainty  what  changes  a  few  years  might  work  in  the  char¬ 
acter  and  reasonableness  of  rates  to  be  charged  for  water  supply.  No 


50 


contract  is  reasonable  by  which  the  governing  authority  abdicates  any 
of  its  legislative  powers  and  precludes  itself  from  meeting,  in  a  proper 
way,  emergencies,  or  occasions  that  may  arise.  These  powers  are 
conferred  in  order  to  be  exercised  again  and  again,  as  may  be  found 
needful  or  politic,  and  those  who  hold  them  in  trust  today  are  vested 
with  no  discretion  to  circumscribe  their  limits  or  diminish  their  effi¬ 
ciency,  but  must  transmit  them  unimpaired  to  their  successors.  This  is 
one  of  the  fundamental  maxims  of  governments ;  and  it  is  impossible 
that  free  government  with  restrictions  for  the  protection  of  individual 
or  municipal  rights  could  long  exist  without  its  recognition.  ( Gale  v. 
Kalamazoo,  23  Mich.,  354;  Millikin  v.  County  of  Edgar,  142  Ill.,  528).” 

In  two  other  cases  ( Rogers  Park  Water  Co.  v.  John  B.  Fergus 
(Dec.,  Feb.  17,  1899),  178  Ill.,  571;  Freeport  Water  Co.  v.  City  of 
Freeport,  186  Ill.,  179)  the  questions  presented  and  decided  were  sub¬ 
stantially  the  same  as  those  passed  upon  in  the  case  of  City  of  Danville 
v.  Danville  Water  Company,  supra.  The  Illinois  Supreme  Court 
adhered  to  its  decisions  in  the  Danville  water  cases.  These  cases  were 
then  appealed  to  the  Supreme  Court  of  the  United  States,  where  the 
judgment  of  the  State  Court,  in  each  case,  was  affirmed.  ( Rogers  Park 
Water  Co.  v.  John  B.  Fergus,  180  U.  S.  624;  Freeport  Water  Co.  v. 
City  of  Freeport,  180  U.  S.,  587). 

'  The  ordinances  referred  to  in  these  cases  were  passed  pursuant 
to  an  act  of  the  legislature  specifically  conferring  upon  municipalities 
the  power  to  contract  for  water  supply  and  fix  rates  therefor.  They 
were  therefore  in  a  stronger  position  than  ordinances  which  provide 
rates  for  gas,  electric,  telephone  or  other  utility  service,  since  the 
legislature  never  specifically  conferred  upon  municipalities  the  power 
to  contract  with  utilities,  fixing  rates  for  a  specified  time. 

The  following  table  gives  the  relation  of  rates  in  effect  in  this 
State  on  various  dates  to  the  rates  provided  for  by  ordinance.  It 
shows  that  on  January  1,  1914,  when  the  Commission  was  organized, 
in  61.8  per  cent  of  the  cities  of  the  State  of  1,000  population  or  over, 
with  rate  restricting  ordinances,  rates  were  lower  than  the  ordinance 
rates;  that  on  January  1,  1918,  the  rates  in  effect  were  lower  than  the 
ordinance  provisions  in  65.7  per  cent  of  these  cities;  that  on  January 
1,  1919,  the  rates  were  lower  than  ordinance  provisions  in  56.7  per  cent 
of  such  cities. 


51 


m 

H 

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Note— Rates  are  considered  as  of  January  1,  for  each  year  specified. 


52 


CONCLUSION. 

Public  utility  corporations  are  the  only  corporations  that  are  not 
free  to  advance  the  prices  of  their  products  and  commodities  to  meet 
increased  cost  of  production  and  operation.  Every  person,  natural  or 
artificial,  engaged  in  private  manufacture  of  trade,,  or  in  private  busi¬ 
ness  of  any  kind,  may  without  restraint  advance  the  prices  to  dealers 
or  consumers  of  his  or  its  products  or  wares  or  goods  to  meet  the  in¬ 
creased  cost  of  manufacture  and  conduct  of  business,  and  this  all  such 
have  done  promptly  from  time  to  time,  during  the  period  of  war  prices. 
This  is  true  as  to  every  conceivable  private  enterprise  or  private  busi¬ 
ness  conducted  and  managed  by  any  private  person  or  corporation. 

All  corporations  conducting  a  business  affected  with  a  public  in¬ 
terest  and  holding  themselves  out  to  serve  all  who  may  require  their 
service  on  equal  terms  and  without  discrimination  as  between  persons 
and  as  between  localities,  and  devoting  their  property  to  the  public  use 
in  this  way  are  public  utilities  and  subject  to  public  supervision  and 
control,  as  to  fares,  rates,  services,  finances  and  so  forth. 

The  legislative  department,  under  the  police  power,  of  which  it  is 
the  sole  repository,  may  exercise  such  control  and  supervision  directly, 
or  may  delegate  such  power  to  an  agency  creatd  by  it. 

While  public  utility  corporations  in  Illinois  were  and  are  affected, 
like  all  other  corporations  engaged  in  private  manufacture,  trade  or 
business,  by  the  abnormal  costs  of  labor,  material,  fuel  and  so  forth, 
caused  by  the  war,  yet  they  are  not  at  liberty  to  advance  fares  for 
transportation  afforded,  or  rates  for  the  commodities  of  gas,  electricity, 
heat,  light,  power,  water  and  so  forth,  manufactured,  furnished  or 
delivered  by  them,  except  as  permitted  to  do  so  by  the  order  of  the 
Public  Utilities  Commission. 

No  matter  to  what  abnormal  height  costs,  of  material  for  construc¬ 
tion  of,  additions  to  or  extensions  of,  plant,  equipment  and  facilities, 
may  advance;  no  matter  that  by  reason  of  increased  costs  of  fuel,  labor 
and  materials  for  maintenance  of  repairs,  renewals  and  depreciation, 
the  cost  of  operation  exceeds  income,  they  must  continue  to  sell  their 
transportation  or  commodities  in  strict  accord  with  their  schedule  of 
fares  or  rates  on  file  with  the  Public  Utilities  Commission.  With 
mounting  costs  of  operation  and'a  fixed  selling  price  of  transportation 
or  commodities,  many  of  the  utilities  in  Illinois  and  all  over  the  country 
found  themselves  threatened  with  bankruptcy  and  consequent  inability 
to  furnish  anything  like  adequate  service,  either  to  the  government  for 
war  requirements  or  to  the  public  served  by  such  utilities. 

In  this  emergency,  there  were  filed  with  the  Commission  about 
three  hundred  applications  for  relief,  and  after  as  full  investigation  as 
time  and  conditions  would  permit  of,  advance  in  fares  and  rates  were 
allowed  in  each  case  of  real  emergency.  As  a  rule,  each  order  provided 
a  time  limit,  at  the  expiration  of  which  the  rate  superceded  by  the 
emergency  order  automatically  should  go  into  effect,  unless  in  the 
meantime  otherwise  ordered  by  the  Commission,  thus  placing  the  bur¬ 
den  upon  the  utility  to  show  continuing  emergency. 


53 


Each  case  was  left  open,  the  Commission  retaining  jurisdiction  to 
modify  such  order  at  any  time,  upon  application  of  any  interested  party, 
or  upon  the  Commission’s  own  motion. 

In  emergency  cases  so  heard  during  the  past  year  and  a  half,  few 
detailed  or  exhaustive  valuations  of  property  of  utilities,  respectively, 
so  applying  were  made.  As  hereinbefore  shown,  it  was  unnecessary  to 
do  so  where  the  question  of  reasonable  rate  of  return  on  the  investment 
was  not  involved,  but  only  the  question  of  a  sufficient  income  to  meet 
the  abnormal  operating  expenses,  with  perhaps  a  slight  margin  of  net 
return. 

Contrary  to  the  general  assumption,  the  Public  Utilities  Act  of 
Illinois  does  not  require  that  a  valuation  shall  be  made  in  all  cases  as 
the  basis  of  a  rate  increase  or  reduction.  The  statute  authorizes  the 
Commission  to  make  a  valuation  when  deemed  necessary.  If  the  Com¬ 
mission  had  delayed  sufficiently  to  make  valuation  in  any  considerable  G 

number  of  such  cases,  the  war  would  have  been  over  before  relief 
could  have  been  granted,  with  consequent  bankruptcy  in  many  cases 
and  totally  inadequate  service  to  the  Government  in  numerous  cases 
where  power  and  light  were  furnished,  and  to  the  public  in  practically 
all. 

As  costs  of  everything,  to  everybody,  including  of  course  public 
utilities,  advanced  with  unexampled  rapidity  and  suddenness,  the  Com¬ 
mission  was  confronted  with  a  most  serious  and  difficult  situation — a 
situation  unique  and  wholly  without  precedent  to  guide — a  situation 
wholly  unforeseen  and  wholly  without  the  contemplation  of  the  legis¬ 
lature  when  the  Public  Utilities  Act  was  adopted.  The  Commission 
gave  very  careful  consideration  to  the  many  legal  and  economic  prob¬ 
lems  thus  presented.  It  moved  cautiously,  but  felt  compelled  to  act 
promptly  to  meet  the  critical  condition. 

The  Commission  was  not  deceived.  It  knew  increases  in  rates,  to 
be  charged  by  public  utilities,  are  always  unpopular.  It  knew  a  pre¬ 
judice  existed,  to  some  extent,  against  public  utilities,  and  that  in  a 
measure  that  prejudice  was  well  founded  upon  past  transactions  and 
an  attitude  toward  the  public  by  some  of  the  utilities. 

If  the  Commission  had  chosen  to  cater  to  prejudice,  to  seek  popu¬ 
larity  and  to  proceed  along  the  lines  of  least  resistance,  on  the  part 
of  patrons  and  consumers  of  public  utilities,  it  could  have  ignored  actual 
conditions,  turned  a  deaf  ear  to  the  appeals  of  a  government  in  war,  to 
the  appeals  of  utilities  in  financial  distress,  and  arbitrarily  denied  all 
relief. 

Instead  of  doing  this,  the  Commission  studied  the  everchanging 
conditions  and  questions,  and  sought  to  meet  the  crisis  writh  courage 
and  efficiency.  There  were  unavoidable  delays  in  the  disposition  of 
cases  and  other  business  of  the  Commission,  about  which  there  was 
some  criticism  by  governmental  war  organizations  and  by  utilities.  In 
this  connection,  it  should  be  said  the  Commission’s  organization  was,  to 
use  an  expressive  slang  phrase,  “all  shot  to  pieces.”  The  war  draft 
took  from  the  Commission  its  technical  men,  engineers  and  account¬ 
ants,  as  well  as  others.  These  were  replaced,  temporarily,  with  the  best 
men  obtainable,  many  inexperienced  in  the  work.  Several  of  the  places 


54 


thus  made  vacant  never  were  filled.  Employees  going  to  the  front, 
either  as  volunteers  or  by  the  draft,  were  given  leaves  of  absence  for 
the  period  of  the  war,  but  those  who  left  their  places  to  accept  civilian 
employment  in  Washington  or  other  places  of  the  country,  at  a  salary 
more  attractive  that  what  the  State  could  give,  were  not  given  leaves 
of  absence,  and  they  have  never  returned  to  the  organization.  Of  those 
who  were  given  leaves  of  absence,  some  have  returned  and  all  those 
who  sought  their  old  placs  were  promptly  reinstated  in  accordance  with 
assurances  given  them  when  they  went  to  the  front.  The  organization 
has  been  crippled  since  the  United  States  entered  the  war  and  has 
not  yet  recovered  its  former  efficiency. 

As  above  indicated,  these  conditions  caused  delays  and  some 
errors  and  mistakes.  This  is  explanatory,  not  apologetic.  The  Com¬ 
mission  has  no  apology  to  make.  On  the  contrary,  it  possesses  a 
feeling  of  pride  in  the  record  of  courage  and  efficiency  with  v/hich 
it  has  met  the  very  trying  and  extraordinary  period  through  which  it 
has  passed  and  is  passing. 

Now  as  to  the  immediate  future,  the  period  of  rehabilitation, 
“unscrambling”  and  reconstruction  during  the  biennium,  and  this  in 
relation  to  its  bearing  upon  a  proposed  legislation  affecting  the  Public 
Utilities  Act,  and  the  jurisdiction  of  the  Commssion :  The  emergency 
orders  in  which  the  duration  of  the  increased  rates  was  limited  are 
coming  on  for  further  action  and  adjustment  in  over  two  hundred 
cases.  In  many,  if  not  all,  of  these  a  permanent  rate  or  further 
temporary  adjustment  will  have  to  be  made  during  the  next  year,  or 
at  least  during  the  next  biennium.  This,  in  a  majority  of  said  cases, 
will  involve  the  making  of  complete  and  exhaustive  valuations  of  the 
property  upon  which  to  fix  a  permanent  rate.  All  such  emergency 
orders  will  have  to  be  dealt  with  in  some  way,  just,  as  in  almost 
innumerable  instances  arising  out  of  exigencies  and  necessities  of  the 
war,  there  are  here  presented  to  the  Commission  questions  of  “un¬ 
scrambling”  and  reconstruction.  The  Commission  looks  forward  to 
it  with  some  trepidation  and  has  given  it  much  consideration  and 
study.  It  has  already  entered  upon  this  work,  as  the  time  limit  of 
the  emergency  orders  first  passed  has  expired.  The  situation  is  com¬ 
plex  and  will  require  all  the  constructive  ability  and  talents  a  state 
body  devoting  all  its  time  and  availing  of  all  its  experience  can  bring 
to  the  task. 

To  now  withdraw  from  the  Public  Utilities  Commission  the 
jurisdiction  to  deal  with  these  matters  and  vest  the  same  in  as  many 
cities,  villages  and  incorporated  towns  as  there  are  in  the  State,  is  to 
open  wide  the  door  to  inefficiency,  inextricable  confusion  and  chaos. 
Those  seeking  to  bring  about  the  changes  at  this  time  should  reflect 
that  such  legislation  would  be  destructive  of  public  utilities  and  as  a 
consequence  very  hurtful  to  all  the  people  of  the  State  served  by 
them. 

Respectfully  submitted, 

PUBLIC  UTILITIES  COMMISSION. 

By  T.  E.  Dempcy, 

Chairman. 


